If You Expect Inflation to Be 2 Percent Next Year

question 38

Multiple Choice

If you expect inflation to be 2 percent next year and you buy a one-year bond paying 5 percent interest, what is your after-tax expected real interest income if the price of the bond is $200 and your tax rate is 40 percent?

• A)$0.20
• B)$20
• C)$10
• D)$2

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Definitions:

Social Attitudes

The prevailing feelings, beliefs, and behaviors people have toward individuals, groups, or concepts within their society.

Thickness

The measure of the dimension from one surface of an object to the opposite surface.

Deformed

Having an irregular or distorted shape or structure, often due to genetic factors, environmental conditions, or injury.

Broader

A term indicating a wider scope or more inclusive range of considerations or elements.