Asked by Hunain Nadeem on Jul 20, 2024
Verified
If the inflation rate was 8%, and the tax rate was 20%, and you deposited money in a bank account that pays 12%, what is your after tax real interest rate? Show you work.
Inflation Rate
Over time, the increment in the price level percentage for goods and services in an economy.
Tax Rate
The proportion of income that is required to be paid as tax by a person or a company.
Real Interest Rate
The real interest rate is the interest rate adjusted for inflation, representing the true cost of borrowing and the true yield for savers.
- Determine the net returns on investments post-taxation, accounting for inflationary effects.
Verified Answer
EK
Ethan KassemJul 23, 2024
Final Answer :
The after tax nominal interest rate is 12% - 12%x20% = 9.6%.
The after tax real interest rate is 9.6% - 8% = 1.6%.
The after tax real interest rate is 9.6% - 8% = 1.6%.
Learning Objectives
- Determine the net returns on investments post-taxation, accounting for inflationary effects.
Related questions
If the Inflation Rate Was 10%, and the Tax Rate ...
In the US, Taxes Are Paid on One's _____ Gains/returns ...
Fifteen Years Ago Your Parents Purchased Some Land with the ...
An Investor's Portfolio Increased in Value from $35,645 to $54,230 ...
Over a Five-Year Period, Hardip's $2,000 Investment Grew to $2675 ...