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16 February, 12:53

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?

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  1. 16 February, 14:14
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    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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