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The effective annual interest rate is 2%, and inflation is running at 1.5% annually. Berko pays income tax on his interest income each year at
The effective annual interest rate is 2%, and inflation is running at 1.5% annually. Berko pays income tax on his interest income each year at a 30% rate (that is, whatever interest he earns, he pays 30% of that amount to the government in taxes).
a) Ignoring taxes, what is Berkos inflation adjusted return on investment?
b) Ignoring inflation, what is Berkos effective annual after tax interest rate on his investment?
c) What is Berkos inflation adjusted, after tax return on investment?
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