George purchased a $10,000 bond that pays a nominal interest rate of 8 percent per year. George's marginal income tax rate is 28 percent. Over the last year, inflation was 3 percent
Find George's before-tax real interest rate and his after-tax real interest rate.
The before-tax interest rate equals the nominal interest rate minus the inflation rate, or . For the after-tax real interest rate, note that George must pay tax on the entire 8 percent (nominal) interest. Hence George pays (8 percent interest rate × 28 percent tax rate) = 2.24 percent as taxes. Therefore his after-tax real interest rate equals his before-tax real interest rate, 5 percent, minus what he pays in taxes, or 5 percent - 2.24 percent = 2.76 percent as his after-tax real interest rate.
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If the per capita income of a country is growing at 3.5 percent per year, approximately how long will it take for that income to double?
a. 20 years b. 25 years c. 35 years d. 70 years
Maximum Feasible Hourly Production Rates (in Tons) of EitherWine or Beef Using All Available ResourcesProductArgentinaFranceWine (gallons)3060Beef (pounds)1030Use the above table. Assuming constant opportunity costs, if Argentina and France specialize based on comparative advantage, then they will trade if the rate of exchange
A. is 2.5 gallons of wine for 1 pound of beef, and Argentina imports beef. B. 0.2 pound of beef for 1 gallon of wine, and Argentina imports wine. C. 4 gallons of wine for 1 pound of beef, and France imports beef. D. 8 pounds of beef for 1 gallon of wine, and France imports wine.