Municipal bonds are yielding 4.4% if they are insured and 4.7% if they are uninsured. Your marginal tax rate is 28%. Your equivalent taxable yield on the insured bonds is ________% and on the uninsured bonds is ________ %.

Question

Quizplus · Accepted Answer

The equivalent taxable yield is calculated by dividing the municipal bond yield by (1 - tax rate). For insured bonds: 4.4% / (1 - 0.28) = 6.11%. For uninsured bonds: 4.7% / (1 - 0.28) = 6.53%.

Municipal Bonds Are Yielding 4