If Your After-Tax Realized Real Interest Rate Was 2 Percent

question 43

Multiple Choice

If your after-tax realized real interest rate was 2 percent over the past year and you owned a one-year bond that paid 8 percent interest, what was the inflation rate if you faced a tax rate of 15 percent?

• A)4.8 percent
• B)5.1 percent
• C)5.4 percent
• D)6.0 percent

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Definitions:

Unfavorable Variances

Situations where actual costs are higher than planned or budgeted costs, or actual revenue is lower than expected.

Management By Exception

A management strategy where only significant deviations from planned results are brought to the attention of management, focusing efforts on areas that are not performing as expected.

Standard Costs

Preset costs established for the manufacture of a product, including direct materials, direct labor, and overhead expenses, against which actual costs are compared.

Fixed Overhead Cost Variance

The difference between the budgeted fixed overhead costs and the actual fixed overhead incurred.