Given a Nominal Interest Rate of 12 Percent,in Which of the Following

question 125

Multiple Choice

Given a nominal interest rate of 12 percent,in which of the following cases would you earn the highest after-tax real interest rate?

• A)Inflation is 5 percent, and the tax rate is 20 percent.
• B)Inflation is 4 percent, and the tax rate is 30 percent.
• C)Inflation is 3 percent, and the tax rate is 40 percent.
• D)Inflation is 2 percent, and the tax rate is 50 percent.

---

Definitions:

Common Stock Dividend Distributable

The amount of dividends declared by a company but not yet paid to common stockholders.

Equity Account

An account representing the owner's interest or stake in a company.

Corporation

A legal entity formed by individuals, stockholders, or shareholders, with its own rights and liabilities separate from those of its members.

Promoters

Individuals or companies that are involved in the planning and establishment of a company, or those who actively support or recommend something.