To a taxpayer in the 34% tax bracket, a municipal bond available at a price of 100 and a coupon rate of 12% has a taxable equivalent yield of __________.
A. 6.6%
B. 10.0%
C. 13.4%
D. 18.2%
D. 18.2%
Taxable equivalent yield = Municipal bond yield / (1 - Tax rate)
Taxable equivalent yield = 0.12 / (1 - 0.34)
Taxable equivalent yield = 0.182 or 18.2%
To a taxpayer in the 34% tax bracket, a municipal bond available at a price...
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