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If You Expect Inflation to Be 2 Percent Next Year

Question 38

Multiple Choice

If you expect inflation to be 2 percent next year and you buy a one-year bond paying 5 percent interest, what is your after-tax expected real interest income if the price of the bond is $200 and your tax rate is 40 percent?


A) $0.20
B) $20
C) $10
D) $2

Correct Answer:

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