If a fully- taxable bond yields a BTROR of 10% (R_b= 10%) and a tax- exempt bond of similar risk earns a BTROR of 7.5% (R_f= 7.5%), then the implicit tax rate is

Name: If a fully- taxable bond yields a BTROR of 10% (R b = 10%) and a tax- exempt bond of similar risk earns a BTROR of 7.5% (R f = 7.5%), then the implicit tax rate is
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Quizplus · Accepted Answer

The implicit tax rate can be calculated using the formula: Implicit Tax Rate = (R_b - R_f) / R_b. Substituting the given values: (10% - 7.5%) / 10% = 0.25 or 25%.

If a Fully- Taxable Bond Yields a BTROR of 10