An Individual Actually Earned a 4 Percent Nominal Return Last

Multiple Choice

An individual actually earned a 4 percent nominal return last year. Prices went up by 3 percent over the year. Given that the investment income was subject to a federal tax rate of 28 percent and a state and local tax rate of 6 percent,what was the investor's actual real after-tax rate of return?

A) -0.36 percent
B) 0.66 percent
C) 2.64 percent
D) 0.72 percent
E) 1.45 percent