What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4 percent for an investor in the 28 percent tax bracket?

Name: What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4 percent for an investor in the 28 percent tax bracket?
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Quizplus · Accepted Answer

The taxable equivalent yield is calculated as the tax-exempt yield divided by (1 - tax rate). So, for a 4% yield and a 28% tax bracket, it's 4% / (1 - 0.28) = 4% / 0.72 = 5.56%.

What Is the Taxable Equivalent Yield on a Municipal Bond