Suppose the Interest Rate on New Issues of Canada Savings

Multiple Choice

Suppose the interest rate on new issues of Canada Savings Bonds is 5% per year and the federal income tax rate on nominal interest earnings is 40%.If the inflation rate is 3%,then an investor's after-tax real rate of return on Canada savings Bonds is

A) 5%.
B) 4%.
C) 3%.
D) 2%.
E) 0%.