The Real Rate of Return on a Taxable Investment Yielding

question 151

Multiple Choice

The real rate of return on a taxable investment yielding 8 percent annually would be ____ percent if the investor were in the 15 percent marginal tax bracket and inflation were 2 percent.

• A)6.80 percent
• B)6.00 percent
• C)4.80 percent
• D)5.10 percent

---

Definitions:

Expense Basis

An accounting method where expenses are recognized and recorded when they are incurred, regardless of when the cash payment is made.

Encumbrance Accounting

An accounting method used mainly by governments that tracks commitments in their budgets, earmarking funds for specific future expenditures.

Purchase Order

A commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services.

Decentralized

A system or organization where decision-making authority is distributed among various levels rather than being concentrated at a single point.