Personal Finance 1st Edition by Jack R. Kapoor

Exercise 30

Calculating Tax-Equivalent Yield. Assume you are in the 33 percent tax bracket and purchase a 4.20 percent, tax-exempt municipal bond. Use the formula presented in this chapter to calculate the taxable equivalent yield for this investment. (Obj. 4)

Step 1 of 2

Municipal bonds are exempted from federal taxation and also generally exempt from state and local taxes only in the state where they are issued. The interest income on municipal bonds exempted from taxation. By using below mentioned formula you can calculate the taxable equivalent yield for a municipal security: