The taxable equivalent yield for a municipal bond will be lower than the tax-exempt yield for that bond.

Question

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The taxable equivalent yield is a calculation used to compare the yield of a tax-exempt bond (like a municipal bond) to a taxable bond. It is typically higher than the tax-exempt yield because it shows what a taxable bond would need to yield to equal the after-tax income of the municipal bond, taking into account the investor's tax rate.

The Taxable Equivalent Yield for a Municipal Bond Will Be