After-tax nominal interest rate is the rate of interest earned on an investment after taxes have been deducted. To calculate the after-tax nominal interest rate you will need to know the marginal tax rate and the investment’s pretax yield.
The after-tax nominal interest rate is calculated by subtracting the marginal tax rate from the pretax yield. For example if an investment has a pretax yield of 10% and the marginal tax rate is 30% the after-tax nominal interest rate would be 7%.
To calculate the after-tax real interest rate you will need to know the inflation rate. The after-tax real interest rate is calculated by subtracting the inflation rate from the after-tax nominal interest rate. For example if the after-tax nominal interest rate is 7% and the inflation rate is 3% the after-tax real interest rate would be 4%.
The after-tax nominal interest rate can be a useful tool for comparing the relative returns of different investments. However it is important to remember that the after-tax real interest rate is the more accurate measure of an investment’s true return.
How do you calculate the after tax nominal interest rate?
The after tax nominal interest rate is calculated by subtracting the tax rate from the interest rate.
What is the after tax nominal interest rate if the interest rate is 10% and the tax rate is 30%?
The after tax nominal interest rate would be 7%.
