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If Your After-Tax Expected Real Interest Rate Is 3 Percent

Question 44

Multiple Choice

If your after-tax expected real interest rate is 3 percent and your expected inflation rate is 2 percent, what was the nominal interest rate on your one-year bond if you faced a tax rate of 20 percent?


A) 5.0 percent
B) 5.75 percent
C) 6.0 percent
D) 6.25 percent

Correct Answer:

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