Calculation of what a taxable investment would have to pay to equal a particular tax-free yield. Can apply an actual investor's current federal or combined tax bracket. Intended to demonstrate the after-tax benefit of investing in municipal securities.
Comparison between a corporate bond's taxable yield and a municipal bond's tax-free yield. Depending on the investor's tax bracket, the after-tax return may be greater with a municipal bond than with a corporate bond that has a higher interest rate. The equivalent taxable yield is equal to the municipal yield divided by 100% minus the tax bracket. For an investor who is in a 28% tax bracket, for example, a 9% municipal bond would have an equivalent taxable yield of 12.5% (9%/72%). See: Yield Equivalence
The yield that must be offered on a taxable bond issue to give the same after-tax yield as a tax-exempt issue.
The yield required from a taxable bond to give the same after-tax yield as a tax-exempt bond.
Equivalent taxable yield is the comparison of a taxable yield on a corporate or government bond with the tax-free yield on a municipal bond. Depending on an investor's tax bracket, an investor's after-tax return may be greater with a municipal bond than with a corporate or government bond that has a higher interest rate.
A comparison of the tax-free yield on a municipal bond to that of a corporate bond.
