The Nominal Interest Rate on Taxable Bonds Is 8%,while on Municipal

question 37

Essay

The nominal interest rate on taxable bonds is 8%,while on municipal bonds (which aren't taxable)it is 5%.The expected inflation rate is 3% and the tax rate on interest income is 40%.Calculate the expected real after-tax interest rate on both bonds.Which would be the better investment? Now suppose the actual inflation rate turned out to be 6%.Which bond was the better investment? Would your answer change if inflation had turned out to be 0%?

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Psychological strategies brought into play by individuals or the ego to protect against feelings of anxiety or guilt, and to maintain self-image.

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Therapeutic Situation

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