The One-Year T-Bill Rate Was 8% on 1/1/00,7% on 1/1/01,and

Essay

The one-year T-bill rate was 8% on 1/1/00,7% on 1/1/01,and 6% on 1/1/02.The GDP deflator (1996 = 100)was 150 on 1/1/00,159 on 1/1/01,165.4 on 1/1/02,and 173.6 on 1/1/03.The tax rate on interest income is 30%.
a.Calculate the after-tax nominal rate of return for 2000,2001,and 2002.
b.If you began with $1000 on 1/1/00 and invested in T-bills each year (paying taxes at the end of each year),how much would you have in nominal terms on 1/1/01? How much would you have in real terms (1996 dollars)?
c.How much was your nominal after-tax interest earned in part b over the three years? How much did you earn in real after-tax dollars?