Neco 2023 Economics Question 37

Practice objective / multiple choice question 37 from the 2023 Neco Economics examination.

Neco 2023 Economics Objective / Multiple Choice Medium Difficulty
Question 37 NECO • 2023 • ECONOMICS • objective

Two government bonds are available. Bond A offers a nominal interest rate of 12% per annum. Bond B is inflation‑indexed: it guarantees a real return of 5% per annum and its nominal return adjusts with inflation. If the expected inflation rate for the next year is 6% and the tax rate on nominal interest income is 30% (Bond B's real return is tax‑exempt), which bond provides the higher expected real return after tax?

Answer Options

A. Bond A provides the higher expected real return after tax (8.4% vs 5%).
B. Bond B provides the higher expected real return after tax (4.2% vs 2.26%).
C. Bond A provides the higher expected real return after tax (2.26% vs 5%).
Correct Answer D. Bond B provides the higher expected real return after tax (5% vs 2.26%).
Correct Answer
D
Correct Option:
Bond B provides the higher expected real return after tax (5% vs 2.26%).

About This Question

This is Neco 2023 Economics Question 37. It is one of the objective questions from the 2023 Neco Economics examination.

Difficulty level: Medium .

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