54. TAXABLE EQUIVALENT YIELD Taxable equivalent yield mea- sures what you would have to earn on a taxable investment to match the yield provided by a tax-exempt municipal bond. Suppose that your total tax rate is T% and the stated interest rate on a tax-exempt bond is r%/year. Then the taxable equivalent yield, R%/year, is given by R 1- T a. Solve for r in terms of R and T. b. If your taxable return is 6%/year and your total tax rate is 20%, what rate of return on a tax-exempt secu- rity do you need to match the after-tax return on a tax- able security?

54. TAXABLE EQUIVALENT YIELD Taxable equivalent yield mea- sures what you would have to earn on a taxable investment to match the yield provided by a tax-exempt municipal bond. Suppose that your total tax rate is T% and the stated interest rate on a tax-exempt bond is r%/year. Then the taxable equivalent yield, R%/year, is given by R 1- T a. Solve for r in terms of R and T. b. If your taxable return is 6%/year and your total tax rate is 20%, what rate of return on a tax-exempt secu- rity do you need to match the after-tax return on a tax- able security?

Algebra & Trigonometry with Analytic Geometry

13th Edition

ISBN:9781133382119

Author:Swokowski

Publisher:Swokowski

Chapter5: Inverse, Exponential, And Logarithmic Functions

Section5.3: The Natural Exponential Function

Problem 40E

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