Suppose that a property is assessed at AV = $120,000 for tax purposes while its market value

Question:

Suppose that a property is assessed at AV = $120,000 for tax purposes while its market value is MV = $150,000. The nominal property tax rate is tn = 0.02.
a. Compute the effective tax rate te.
b. Explain the difference between the nominal and effective tax rates.
c. Suppose that a reassessment occurs that raises the assessed value to AV = $130,000. Explain the effect of the reassessment on the effective tax rate.