In this book, we do not consider taxes and their impact on return in detail, but let us assume that we are subject to a tax rate t on the capital growth. This means that the nominal after-tax return rate is . Using the approximation of Eq. (3.21), the real after-tax return is

The product term intint shows how tax and inflation rates compound in reducing the real increase of wealth.

Data From Equation (3.21)

Transcribed Image Text:

Ti (1-t).