Equivalent Taxable Yield rm = r(1-t) r = rm/(1-t) Example: Suppose your tax rate is 25%...

 

Transcribed Image Text:

Equivalent Taxable Yield rm = r(1-t) r = rm/(1-t) Example: Suppose your tax rate is 25% on a taxable corporate bond. A municipal bond is available paying 4% interest. What interest rate would you have to receive on the corporate bond for it to be equivalent to the municipal bond? Equivalent Taxable Yield rm = r(1-t) r = rm/(1-t) Example: Suppose your tax rate is 25% on a taxable corporate bond. A municipal bond is available paying 4% interest. What interest rate would you have to receive on the corporate bond for it to be equivalent to the municipal bond?

Answer rating: 100% (QA)

To find the equivalent taxable yield for a municipal bo... View the full answer