The yield on a taxable money market mutual fund earning 3.0 percent is equivalent to a ____ percent yield on a tax-exempt money market fund for a taxpayer in the 28 percent marginal tax bracket.

Question

Quizplus · Accepted Answer

To find out the equivalent yield on a tax-exempt money market fund, we need to use the formula: Taxable yield / (1 - marginal tax rate). So, in this example, the equivalent yield on a tax-exempt money market fund is 3.0% / (1 - 0.28), which equals 4.167%. Rounded to the nearest tenth, this is equivalent to 4.2%. Therefore, the answer is C (2.2%).

The Yield on a Taxable Money Market Mutual Fund Earning