You are considering an investment in a municipal bond that has a yield of 5%. Your tax rate is 25%. What is your taxable equivalent yield?

Name: You are considering an investment in a municipal bond that has a yield of 5%. Your tax rate is 25%. What is your taxable equivalent yield?
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Question

Quizplus · Accepted Answer

The taxable equivalent yield is calculated as the tax-free yield divided by (1 - tax rate). So, for a 5% yield and a 25% tax rate, it's 5% / (1 - 0.25) = 5% / 0.75 = 6.67%.

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