Question

What's the taxable equivalent yield on a municipal bond with a yield to maturity of 5.25...

What's the taxable equivalent yield on a municipal bond with a yield to maturity of 5.25 percent for an investor in the 25 percent marginal tax bracket? (Round your answer to 2 decimal places.)

Multiple Choice

  • 1.31%

  • 21.00 %

  • 5.25%

  • 7.00%

0 0
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Answer #1

taxable equivalent yield=municipal bond yield/(1-tax rate)

=5.25/(1-0.25)

which is equal to

=7%

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