An individual actually earned a 4% nominal return last year. Prices went up by 3% over the year. Given that the investment income was subject to a federal tax rate of 28% and a state and local tax rate of 6%, what was the investor's actual real after-tax rate of return? A. -0.36% B. 0.66% C. 1.45% D. 0.72%

An individual actually earned a 4% nominal return last year. Prices went up by 3% over the year. Given that the investment income was subject to a federal tax rate of 28% and a state and local tax rate of 6%, what was the investor's actual real after-tax rate of return? A. -0.36% B. 0.66% C. 1.45% D. 0.72%

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter2: Financial Statements, Cash Flow,and Taxes

Section: Chapter Questions

Problem 7P

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An individual actually earned a 7 percent nominal return last year. Prices went up by 3 percent over the year. Given that the investment income was subject to a federal tax rate of 28 percent and a state and local tax rate of 6 percent, what was the investor's actual real after-tax rate of return?
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