Consider an investor facing a 40% marginal tax rate who purchases a tax-exempt issue with a yield of 3.00%. The equivalent taxable yield is 5.00%.

Name: Consider an investor facing a 40% marginal tax rate who purchases a tax-exempt issue with a yield of 3.00%. The equivalent taxable yield is 5.00%.
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Quizplus · Accepted Answer

The equivalent taxable yield is calculated as the tax-exempt yield divided by (1 - marginal tax rate). In this case, 3.00% / (1 - 0.40) = 5.00%, indicating the statement is true.

Consider an Investor Facing a 40% Marginal Tax Rate Who