What would be your equivalent taxable yield if you are in a 35% tax bracket and can earn 6% on a municipal bond?

Question

Quizplus · Accepted Answer

To calculate the taxable equivalent yield, we need to use the formula:

Taxable Equivalent Yield = Municipal Bond Yield / (1 - Tax Bracket)

Substituting the given values, we get:

Taxable Equivalent Yield = 6% / (1 - 0.35)
Taxable Equivalent Yield = 6% / 0.65
Taxable Equivalent Yield = 9.23%

Therefore, the best choice is B, with a taxable equivalent yield of 9.23%.

What Would Be Your Equivalent Taxable Yield If You Are