Definitions for "yield equivalence"
The yield needed on a taxable investment in order to match the tax-free return...
same as equivalent taxable yield
The rate of interest at which a tax-exempt bond and a taxable security of similar quality provide the same return. To calculate the yield that must be provided by a taxable security to equal that of a tax-exempt bond for investors in different tax brackets, the tax-exempt yield is divided by the reciprocal of the tax bracket (100 less 28%, for example) to arrive at the taxable yield. To convert a taxable yield to a tax-exempt yield, the formula is reversed, that is, the tax-exempt yield is equal to the taxable yield multiplied by the reciprocal of the tax bracket.