The Real Rate of Return on a Tax-Free Investment Yielding

question 15

Multiple Choice

The real rate of return on a tax-free investment yielding 7 percent annually would be ____ percent if the investor were in the 35 percent marginal tax bracket and inflation were 4 percent.

• A)-0.55 percent
• B)0.55 percent
• C)3.00 percent
• D)4.48 percent

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Definitions:

Activeness

A quality of being active, showing initiative, or willingly engaging in activities.

Flexibility

Ability to tolerate a mismatch (discorrespondence) between needs and rewards.

Theory of Work Adjustment

A psychological theory explaining how workers adjust to their jobs by balancing their abilities with job demands and their needs with job rewards.

Celerity

The quality of being quick or prompt; swiftness of action or motion.