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Suppose That the Tax Rate on Interest Income Is 25

Question 107

Multiple Choice

Suppose that the tax rate on interest income is 25 percent, the real interest rate is 4 percent, and the inflation rate is 4 percent. In this case, the real after-tax interest rate is equal to


A) .5 percent.
B) 3.5 percent.
C) 4.0 percent.
D) 2.0 percent.

Correct Answer:

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