You Purchase a One-Year Security with an Expected Real Pretax

question 8

Multiple Choice

You purchase a one-year security with an expected real pretax return of 5%. You forecast a 7% rate of inflation and are in the 28% tax bracket. Your real after-tax return would be

• A) 1.8%.
• B) -1.2%.
• C) 4.3%.
• D) 2.7%.

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