Given a Nominal Interest Rate of 8 Percent, in Which

question 215

Multiple Choice

Given a nominal interest rate of 8 percent, in which of the following cases would you earn the highest after-tax real interest rate?

• A)Inflation is 5 percent; the tax rate is 20 percent.
• B)Inflation is 4 percent; the tax rate is 30 percent.
• C)Inflation is 3 percent; the tax rate is 40 percent.
• D)The after-tax real interest rate is the same for all of the above.