Question

Given a nominal interest rate of 6 percent, in which of the following cases would you earn the highest after-tax real rate of interest?
a. Inflation is 2.5 percent; the tax rate is 25 percent.
b. Inflation is 3 percent; the tax rate is 20 percent.
c. Inflation is 2 percent; the tax rate is 30 percent.
d. The after-tax real interest rate is the same for all of the above.

Answer 1

Answer and Explanation:

c. Inflation is 2 percent; the tax rate is 30 percent