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Homework answers / question archive / The City of Tempe has a municipal bond outstanding with an interest rate of 3
The City of Tempe has a municipal bond outstanding with an interest rate of 3.6%. For an investor in the 35% tax bracket, what is their tax equivalent yield?
Group of answer choices
4.8%
5.1%
5.3%
5.5%
Given,
Interest rate= 3.6%
Tax bracket= 35%
Tax equivalent yield= Interest rate/ (1- tax rate)
= 3.6%/ (1- 35%)
= 5.5%
