Municipal bond M pays a yield of 6.77 percent, if your marginal tax rate is 28...

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Question

Municipal bond M pays a yield of 6.77 percent, if your marginal tax rate is 28...

Municipal bond M pays a yield of 6.77 percent, if your marginal tax rate is 28 percent, Calculate the tax equivalent yield (round your answers to 3 decimal places. e.g., 32.161)

Multiple Choice
9.403%
9.420%
9.395%

9.412%

business finance

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Answer 1

Answer #1

Tax-equivalent Yield * (1 - Tax rate) = Tax free Yield

Yield on a Municipal bond is tax free

Tax-equivalent yield = 6.77%/(1-28%)

Tax-equivalent yield = 9.403%

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Answer 2

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