Tara Deposits Money into an Account with a Nominal Interest

question 67

Multiple Choice

Tara deposits money into an account with a nominal interest rate of 6 percent.She expects inflation to be 2 percent.Her tax rate is 20 percent.Tara's after-tax real rate of interest

• A)will be 2.8 percent if inflation turns out to be 2 percent;it will be higher if inflation turns out to be higher than 2 percent.
• B)will be 2.8 percent if inflation turns out to be 2 percent;it will be lower if inflation turns out to be higher than 2 percent.
• C)will be 3.2 percent if inflation turns out to be 2 percent;it will be higher if inflation turns out to be higher than 2 percent.
• D)will be 3.2 percent if inflation turns out to be 2 percent;it will be lower if inflation turns out to be higher than 2 percent.

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Definitions:

Specific Learning Disability

A disorder in one or more of the basic psychological processes involved in understanding or using language, spoken or written, which may manifest itself in an imperfect ability to listen, think, speak, read, write, spell, or do mathematical calculations.

Visual Handicap

A condition limiting a person's ability to see, ranging from partial vision loss to total blindness.

Intellectual Disabilities

Disabilities characterized by significant limitations both in intellectual functioning and in adaptive behavior, which covers a range of everyday social and practical skills.

Incremental

Refers to a process of adding or making changes in a series of small, gradual steps.