What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket?

Name: What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket?
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Quizplus · Accepted Answer

The taxable equivalent yield is calculated as the tax-exempt yield divided by (1 - tax rate). So, for a 4.5% yield and a 39% tax bracket, it's 4.5% / (1 - 0.39) = 7.38%.

What Is the Taxable Equivalent Yield on a Municipal Bond