After-Tax Real Interest Rate

So you own a bond. It pays 5 percent interest and you pay 40 percent marginal tax rate. After tax, you're making 3 whopping percent. But we have inflation of 2 percent a year...which eats into the real, net returns on that bond. So if the cash paid by that bond is worth 98 percent of what is was, on a real, interest-reflected rate, then that net 3 percent is worth .98 times 3 percent...or 2.9 percent. That's the After-Tax Real Interest Rate.