What is the taxable-equivalent yield (TEY) on a municipal bond with a 4.50% coupon, if you...

Question

Question

What is the taxable-equivalent yield (TEY) on a municipal bond with a 4.50% coupon, if you are in the 35% tax bracket

Answer 1

Answer #1

taxable-equivalent yield (TEY) = Tax free bond yield / (1- tax rate)

= 0.045 / (1-0.35)

= 0.045 / 0.65

= 0.06923

= 6.92%

Answer 2

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