Business, 24.06.2019 20:10, calvinclifton

Rajiv receives a portion of his income from his holdings of interest-bearing u. s. government bonds. the bonds offer a real interest rate of 2.5% per year. the nominal interest rate on the bonds adjusts automatically to account for the inflation rate. the government taxes nominal interest income at a rate of 10%. the following table shows two scenarios: a low-inflation scenario and a high-inflation scenariogiven the real interest rate of 2.5% per year, find the nominal interest rate on rajiv's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. inflation rate real interest rate nominal interest rate after-tax nominal interest rate after-tax real interest rate(percent) (percent) (percent) (percent) (percent)2.0 2.5 7.5 2.5 compared with higher inflation rates, a lower inflation rate will the after-tax real interest rate when the government taxes nominal interest income. this tends saving, the quantity of investment in the economy the economy's long-run growth rate.

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Rajiv receives a portion of his income from his holdings of interest-bearing u. s. government bonds....