An investor who is in the 35% federal tax bracket and the 5% state bracket buys a 6.5% yield corporate bond.What is his after tax yield?

Name: An investor who is in the 35% federal tax bracket and the 5% state bracket buys a 6.5% yield corporate bond.What is his after tax yield?
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Question

Quizplus · Accepted Answer

The after-tax yield is calculated by multiplying the bond's yield by (1 - combined tax rate). The combined tax rate is 40% (35% federal + 5% state). So, the after-tax yield is 6.5% * (1 - 0.40) = 3.90%.

An Investor Who Is in the 35% Federal Tax Bracket