Hi, I was wondering if you could explain how to solve problem:
You put money into an account and earn an real interest rate of 5 percent. Inflation is 2 percent, and your marginal tax rate is 35 percent. What is your after-tax real rate of interest?
a. 5.25 percent
b. 3.05 percent
c. 2.55 percent
d. 1.25 percent