Answered

A municipal bond carries a coupon rate of 4.25% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 35% combined tax bracket?

Answer :

mirianmoses

Answer and Explanation:

Municipal bond rate = Taxed bond rate × (1-Tax rate)

4.25 = Taxed bond rate × ( 1 - 0.35)

Taxed bond rate = 6.54

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