Assume You Financed a New House with a 30-Year Fixed

Multiple Choice

Assume you financed a new house with a 30-year fixed rate mortgage at a 6% annual interest.rate.If you can deduct your mortgage interest payments from your taxable income and you are in the 30% tax bracket, what would be the real after-tax cost of borrowing if the average annual inflation rate is 4.2% over the 30-years period?

A) +4.2%
B) +1.8%
C) +1.2%
D) 0%
E) -1.2%