Suppose One Year Ago the Price Index Was 120 and Maria

question 72

Multiple Choice

Suppose one year ago the price index was 120 and Maria purchased $20,000 worth of bonds. One year later the price index is 126. Maria redeems his bonds for $22,250 and is in a 40 percent tax bracket. What is Maria's real after-tax rate of interest to the nearest tenth of a percent?

• A)4.3 percent
• B)3.1 percent
• C)1.8 percent
• D)1.2 percent

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