John Smith is in the 35 percent tax bracket. If he were to purchase a $1,000 municipal bond that had a stated interest rate of 6.9%, the taxable equivalent yield would be 6.90% or 8.26% or 10.62% or 9.58%.
Added by Stephanie T.
Step 1
The tax-exempt yield can be calculated using the formula: Tax-exempt yield = Stated interest rate / (1 - Tax rate) Tax-exempt yield = 6.9% / (1 - 0.35) Tax-exempt yield = 6.9% / 0.65 Tax-exempt yield = 10.62% Show more…
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