Consider a person who has a home loan of Rs 50,00,000. Suppose the nominal interest on loan is 18% per annum. Let the expected inflation be 12%. Suppose the nominal interest payments are deducted from income before paying taxes. Assume that the tax rate is 10%. Compute the effective real interest rate per annum on loan . Effective real interest rate implies the real interest rate after taking into account the tax benefit or tax subsidy on loan. * 1 point 4.2% per annum 5.4% per annum none of the options is correct If the positive interest rate differential in favour of a foreign monetary centre is 4 percent per year and the foreign currency is at a forward discount of 2 percent per year, roughly how much would an interest arbitrageur earn from the purchase of foreign three-month treasury bills if he or she covered the foreign exchange risk? * 1 point 2 percent per annum 6 percent per annum Suppose that tax code is such that it considers nominal incomes and nominal gains. Then, state true or false for the following statement: 'The higher the inflation rate, the higher the effective tax rate on capital gains.' * 1 point True or false Fixed exchange rate with band where the band of fluctuation is infinity is equivalent to the flexible exchange rate system. * True or false