Given a Nominal Interest Rate of 8 Percent, in Which

question 293

Multiple Choice

Given a nominal interest rate of 8 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

• A)Inflation is 3 percent; the tax rate is 25 percent.
• B)Inflation is 2 percent; the tax rate is 50 percent.
• C)Inflation is 1 percent; the tax rate is 75 percent.
• D)The after-tax real interest rate is the same for all of the above.

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Definitions:

Personality Factor

A dimension of personality used to categorize individuals based on their characteristics and behaviors.

Aloof

Displaying a lack of interest or a detached, distant demeanor; not friendly or forthcoming.

Fullest Development

Reaching the highest level of growth or potential in various aspects of an individual's life.

Self-actualization

A concept in humanistic psychology referring to the realization or fulfillment of one's talents and potentialities, considered as a drive or need present in everyone.