Asked by Guillermo Orizaba on Jul 24, 2024
Verified
If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.
Inflation Rate
The rate at which the overall cost of goods and services in an economy increases over time.
Tax Rate
The percentage at which an individual or corporation is taxed by the government on income or profits.
- Calculate real after-tax returns on investments in the context of inflation.
Verified Answer
TM
Tiffany McCoyJul 30, 2024
Final Answer :
The after- tax nominal interest rate is 14% - 14%x.25 = 10.5%.
The after- tax real interest rate is 10.5% - 10% = .5%.
The after- tax real interest rate is 10.5% - 10% = .5%.
Learning Objectives
- Calculate real after-tax returns on investments in the context of inflation.
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