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Pat receives a portion of his income from his holdings of interest-bearing U.S. govemment bonds....

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Accounting

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Pat receives a portion of his income from his holdings of interest-bearing U.S. govemment bonds. The bonds offer a real interest rate of 3%. 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 20%. The following table shows two scenarios: a low-inflation scenario and a highinflation scenario. Given the real interest rate of 3% per year, find the nominal interest rate on Pat's bonds, the after-tax nominal interest rate, and the after-tax real fi. ......... winder a arh inflation scenario. Compared with lower inflation rates, a higher inflation rate will nominal interest income. This tends to saving, thereby the economy's long-run growth rate

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