If Your After-Tax Expected Real Interest Rate Is 3 Percent

question 44

Multiple Choice

If your after-tax expected real interest rate is 3 percent and your expected inflation rate is 2 percent, what was the nominal interest rate on your one-year bond if you faced a tax rate of 20 percent?

• A)5.0 percent
• B)5.75 percent
• C)6.0 percent
• D)6.25 percent

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Definitions:

Aerobic Exercise

Physical activity that improves cardiovascular health by increasing the heart rate and oxygen intake for a prolonged period.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome.

Body Mass Index (BMI)

A measure of body fat based on height and weight that applies to adult men and women.

Overweight

Having more body fat than is optimally healthy, considered as having a body mass index (BMI) over 25.