In Which of the Following Cases Is the After-Tax Real

question 27

Multiple Choice

In which of the following cases is the after-tax real interest rate highest?

• A)inflation is 6%,the pre-tax real interest rate is 3%,and the tax rate is 20%.
• B)inflation is 6%,the pre-tax real interest rate is 3%,and the tax rate is 25%.
• C)inflation is 4%,the pre-tax real interest rate is 2%,and the tax rate is 20%.
• D)inflation is 4%,the pre-tax real interest rate is 2%,and the tax rate is 25%.

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Definitions:

Long-lived Assets

Assets that have a useful life of more than one year, used in the operation of a business and not intended for resale.

Cash Balance

The amount of cash on hand at any given time in a company's financial accounts.

End of the Period

A term referring to the conclusion of a specific accounting period, at which financial statements are prepared.

Statement of Cash Flows

A financial report that details the amount of cash and cash equivalents entering and leaving a company.