What’s the taxable equivalent yield on a municipal bond with a yield to maturity of 5.0 percent for an investor in the 33 percent marginal tax bracket? (Round your answer to 2 decimal places.)

What’s the taxable equivalent yield on a municipal bond with a yield to maturity of 5.0 percent for an investor in the 33 percent marginal tax bracket? (Round your answer to 2 decimal places.)

 

Use equation 6.4:
Equivalent taxable yield =Muniyield1taxrate=5.00%1.33=7.46%Equivalent taxable yield =Muni⁢  yield1−tax⁢  rate=5.00%1−.33=7.46% 

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