Final answer:
The rate that should be used when calculating the after-tax future value of investments with a constant rate of return that is taxed annually is the after-tax rate of return.
Step-by-step explanation:
The rate that should be used when calculating the after-tax future value of investments with a constant rate of return that is taxed annually is the after-tax rate of return. This rate takes into account the taxes paid on the investment earnings. To calculate the after-tax rate of return, subtract the tax rate from 1 and multiply it by the annual rate of return. For example, if the annual rate of return is 7% and the tax rate is 20%, the after-tax rate of return would be (1-0.20) * 0.07 = 0.056 or 5.6%.