For a taxpayer in the 24% marginal tax bracket, a 20-year municipal bond currently yielding 5.5% would offer an equivalent taxable yield of
A) 7.24%.
B) 10.75%.
C) 5.5%.
D) 4.125%.

Question

Quizplus · Accepted Answer

The equivalent taxable yield is calculated by dividing the tax-exempt yield by (1 - marginal tax rate). For a 5.5% yield and a 24% tax bracket, the calculation is 5.5% / (1 - 0.24) = 7.24%.

For a Taxpayer in the 24% Marginal Tax Bracket, a 20-Year