Given a Nominal Interest Rate of 5 Percent,in Which of the Following

question 85

Multiple Choice

Given a nominal interest rate of 5 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 15 percent.
• B)Inflation is 2 percent;the tax rate is 40 percent.
• C)Inflation is 1 percent;the tax rate is 50 percent.
• D)The after-tax real interest rate is the same for all of the above.

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Definitions:

One-Tail Test

A statistical hypothesis test in which the region of rejection is on only one side of the sampling distribution.

Test-Statistic

A value computed from sample data during a hypothesis test, used to determine whether to reject the null hypothesis.

P-Value

The probability, under the null hypothesis, of obtaining a result equal to or more extreme than what was actually observed.

Null Hypothesis

An assertion for statistical testing that presupposes no significant difference or correlation between specified groups or variables.