Homework SourseFind the equivalent taxable yield of the municipal bond for
Find the equivalent taxable yield of the municipal bond for tax brackets of zero, 10%, 20%, and 30%, if it offers a yield of 4.60%. (Round your answers to 2 decimal places.)
| Tax Brackets | ||
| a. | Zero | % |
| b. | 10% | % |
| c. | 20% | % |
| d. | 30% | % |
|
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Solution
equivalent taxable yield = tax free yield / (1 - tax rate).
here, tax free yield = municipal yield = 4.60% .
tax rates = 0%,10% ,20% ,30%.
| a. | zero => (4.60% / (1-0%) | 4.60% |
| b. | 10%=> (4.60%/ (1-0.10)) | 5.11% |
| c. | 20% =>(4.60/(1-0.20)) | 5.75% |
| d. | 30%=>(4.60/(1-0.30)) | 6.57% |
