Given a Nominal Interest Rate of 8 Percent, in Which

question 293

Multiple Choice

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

• A)Inflation is 3 percent; the tax rate is 25 percent.
• B)Inflation is 2 percent; the tax rate is 50 percent.
• C)Inflation is 1 percent; the tax rate is 75 percent.
• D)The after-tax real interest rate is the same for all of the above.