Given a Nominal Interest Rate of 12 Percent, in Which

Multiple Choice

Given a nominal interest rate of 12 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

A) Inflation is 5 percent, and the tax rate is 20 percent.
B) Inflation is 4 percent, and the tax rate is 30 percent.
C) Inflation is 3 percent, and the tax rate is 40 percent.
D) Inflation is 2 percent, and the tax rate is 50 percent.