If you compare the yield of a municipal bond with that of a negotiable certificate of deposit,what is the equivalent before-tax yield of the certificate of deposit if the municipal bond has a yield of 8% per year and the investor has a marginal tax rate of 28%?
A) 8.28%
B) 9.30%
C) 10.24%
D) 11.11%

Question

Quizplus · Accepted Answer

The equivalent before-tax yield of the certificate of deposit can be calculated using the formula: Municipal Bond Yield / (1 - Tax Rate). Plugging in the given values: 8% / (1 - 0.28) = 11.11%.

If You Compare the Yield of a Municipal Bond with That