For a taxpayer in the 25% marginal tax bracket,a 20-year municipal bond currently yielding 5.5% would offer an equivalent taxable yield of:
A)7.33%.
B)10.75%.
C)5.5%.
D)4.125%.
E)none of the above.

Question

Quizplus · Accepted Answer

To calculate the equivalent taxable yield, we need to use the formula:
Equivalent Taxable Yield = Municipal Bond Yield / (1 - Marginal Tax Rate)
Plugging in the values, we get:
Equivalent Taxable Yield = 5.5% / (1 - 0.25)
Equivalent Taxable Yield = 5.5% / 0.75
Equivalent Taxable Yield = 7.33%
Therefore, the answer is A) 7.33%.

For a Taxpayer in the 25% Marginal Tax Bracket,a 20-Year