1. The rate of infl ation is 5 percent and the real interest rate is 3 percent. What is the nominal interest rate? 2. Investors face a tax rate of 33 percent on interest received from corporate bonds....

1. The rate of infl ation is 5 percent and the real interest rate is 3 percent. What is the nominal interest rate?

2. Investors face a tax rate of 33 percent on interest received from corporate bonds. If municipal bonds currently offer yields of 6 percent, what yield would equally risky corporate bonds need to offer to be competitive?