An investor has an investment that pays 8.5 percent before taxes and inflation.?

Question

If the investor is in the 31 percent marginal tax bracket and the rate of inflation is 2.3 percent, what is the "real" or effective rate of return?

a. 8.3045%

b. 5.8650%

c. 5.6695%

d. 3.5650%

Answer 1

b. 5.8650%