Given a Nominal Interest Rate of 6 Percent,in Which Case

question 217

Multiple Choice

Given a nominal interest rate of 6 percent,in which case would you earn the highest after-tax real rate of interest?

• A)Inflation is 4 percent; the tax rate is 25 percent.
• B)Inflation is 3 percent; the tax rate is 20 percent.
• C)Inflation is 2 percent; the tax rate is 15 percent.
• D)The after-tax real interest rate is the same for all of the above.

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Definitions:

Factory Overhead Cost

All of the costs of producing a product except for direct materials and direct labor.

Normal Capacity

The average level of operational output or activity that a company can sustain over a long period, considering fluctuations in demand and maintenance schedules.

Cost Variance

The difference between the actual cost and the standard or planned cost in a budget.

Standard Cost

A predetermined cost of manufacturing, selling, or any other business activity, used for budgeting and performance evaluation.