What would the after-tax yield be on an investment that offers a 6 percent fully taxable yield? Assume a marginal tax rate of 31 percent.
A) 2.79 percent
B) 6.48 percent
C) 4.14 percent
D) 7.20 percent
E) 12.50 percent

Question

Quizplus · Accepted Answer

To calculate the after-tax yield, we need to subtract the taxes payable from the total yield. The tax payable at a 31 percent marginal tax rate on a 6 percent yield would be 0.31 x 6 = 1.86 percent. Therefore, the after-tax yield would be 6 percent - 1.86 percent = 4.14 percent.

What Would the After-Tax Yield Be on an Investment That