Question

**Is** the **annual growth rate** on
an **investment** the equivalent of **the
after-tax nominal rate of return, the real rate of return**
or **the after-tax real rate of return ?**

Answer #1

Annual growth rate = is the average increase in the value of an portfolio, asset etc over a period of a year

After tax nominal rate of return = nominal return * ( 1 - capital tax rate )

nominal return - rate of return on a investment without adjusting for inflation.

Real rate of return - Is the annual percentage of profit earned
on investment, adjusted for inflation.

real rate of return indicates actual purchasing power of a given
amount of money over time.

After tax real rate of return - is the financial benefit of an
investment after accounting for the effects of inflation and
taxes.

Sol : Annual growth rate on an investment is not equivalent to after tax rate of return, real rate of return, after tax real rate of return as it is adjusted against inflation and tax.

Tax bracket: 20%, nominal return: 10%, Inflation rate: 6%
a.before-tax real rate?
b.after-tax real return?
c.after-tax nominal return?
d.after-tax real interest rate?
e.??=????????? ????
× ??? ???????it=inflation rate × tax
bracket?
f.????? ??? ????
??????− ????? ??? ????
???????? ????−??after tax real
return- after tax real interest rate-it?

Tax bracket: 20%, nominal return: 10%, Inflation rate: 6%
a.before-tax real rate?
b.after-tax real return?
c.after-tax nominal return?
d.after-tax real interest rate?
e.??=????????? ????
× ??? ???????it=inflation rate × tax
bracket?
f.????? ??? ????
??????− ????? ??? ????
???????? ????−??after tax real
return- after tax real interest rate-it?

Assuming a 25% (1/4) tax rate, what would be the real return on
investment after taxes if the nominal interest rate is 8%
Nominal Interest Rate
Inflation
Real Return After Taxes
4%
4%
8%
4%
12%
4%
16%
4%
Note: Please use whole numbers for the percent, but do not
include the % sign. It will be marked incorrect otherwise.
Example. If the answer is 25%, write 25
Group of answer choices
-1%
8%
2%
5%

The nominal monthly rate for a loan is quoted at 5%. What is the
equivalent annual rate? Semiannual rate? Continuous rate?

1. Growth rate
of nominal GDP – Inflation rate =
a. price
level.
b. the growth
rate of nominal GDP.
c. the growth
rate of real GDP.
d. the growth
rate of long-run trend GDP.
e. how much the
economy contracts during a recession.
2. The
consumption category does not include purchases
a. of new cars
made by consumers.
b. of
entertainment services made by consumers.
c. of new
clothing made by consumers.
d. of new houses
made by consumers....

A tax-exempt investment (X) offers annual return of 7.5%, a
taxable investment (Y) offers annual return of 9%. Which investment
will you choose if your marginal tax rate is 30%? At what marginal
tax rate will you be indifferent between the two investment
alternatives?

The U.S nominal annual rate of interest is 5% and the Malaysian
annual nominal rate of interest on the Ringgit is 13%. At the same
time, the spot exchange rate is 3 MYR per USD and the real rate is
2% in both the US and Malaysia.
What is the one year forecast of the MYR per USD spot exchange
rate, assuming the International Fisher effect holds?
Describe the potential problem with your forecast in part A. If
you determined...

you
are considering an investment that has a nominal annual interest
rate of 7.88percent compounded semiannually .therefore the
effective annual rate or EAR (anual percentage yield)is....

You are offered an investment that will pay a nominal rate of
10% per year. If the inflation rate is 3%, what is the exact real
rate of return?
Select one:
a. 7.00%
b. 6.95%
c. 7.05%
d. 6.80%
e. None of the above.

Suppose that the tax rate is 25% and compute the before-tax real
interest rate and the after-tax real interest rate in the following
situations.
a. Nominal interest rate = 9%, inflation is 4%.
b. Nominal interest rate = 8%, inflation is 3%.
c. Nominal interest rate = 7%, inflation is 4%.

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