What interest rate on a 7-year corporate bond of equal risk would provide you with the same after-tax return?
What interest rate on a 7-year corporate bond of equal risk would provide you with the same after-tax return?
A 7-year municipal bond yields 4.8%. Your marginal tax rate (including state and federal taxes) is 28%. What interest rate on a 7-year corporate bond of equal risk would provide you with the same after-tax return?
Answers:
coldfuse: 4.8% / (1 - 28%) = ?
4.8% / .72 = 6.67%
2010-02-06 13:04:09
2010-02-06 13:04:09
Chosen Answer
Brent Robertson: I'm assuming the 7 year muni is a tax free yield. What is the equivalent yield needed for a corporate considering a 28% tax bracket? The formula is: Equivalent Taxable yield is equal to the tax free yield (.048) divided by 100%-28% (.72). The equivalent taxable yield in the case is .0666.
2010-02-06 13:20:15
Brent Robertson: I'm assuming the 7 year muni is a tax free yield. What is the equivalent yield needed for a corporate considering a 28% tax bracket? The formula is: Equivalent Taxable yield is equal to the tax free yield (.048) divided by 100%-28% (.72). The equivalent taxable yield in the case is .0666.
2010-02-06 13:20:15