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Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara’s after-tax real rate of interest
A.
will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if inflation turns out to be higher than 2 percent.
B.
will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if inflation turns out to be higher than 2 percent.
C.
will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if inflation turns out to be higher than 2 percent.
D.
will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if inflation turns out to be higher than 2 percent.