Which of the following statements is FALSE? In general, if the interest rate is r and the tax rate is , then for each $1 invested you will earn interest equal to r and owe taxes of r on the interest. U.S. Treasury securities are widely regarded to be risk-free because there is virtually no chance the government will default on these bonds. Taxes reduce the amount of interest the investor can keep, and we refer to this reduced amount as the tax effective interest rate. Investors may receive less than the stated interest rate if the borrowing company has financial difficulties and is unable to fully repay the loan.