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Tax-equivalent yield = Tax-exempt bond yield / (1 – Marginal tax rate) Here’s an example of how tax equivalent yield works. Say you want to compare a taxable bond that offers a 5.0% yield with ...
Here’s the formula for the tax-equivalent yield: Tax-equivalent yield = Municipal bond yield / (1 – your total tax rate) For example, imagine you pay federal tax at a 24 percent rate and state ...
Short-term gains from bonds held for less than a year are taxed at your ordinary income tax rate, while long-term gains from bonds held for more than a year are taxed at a lower rate, typically ...
Comparing the yield on a municipal bond to that of a corporate or U.S. Treasury bond can be misleading, because of differing tax treatment of the income from the two types of securities. For that reason, investors use the concept of taxable equivalent yield to compare municipal and corporate or Treasury bonds. The taxable equivalent yield on a ...
The bond equivalent yield or BEY for an investment is a calculated annual percentage yield for an investment, which may not pay out yearly. It is not to be confused with a bond 's coupon rate. This allows investments with different payout frequencies to be compared.
30-day yield. In the United States, 30-day yield is a standardized yield calculation for bond funds. The formula for calculating 30-day yield is specified by the U.S. Securities and Exchange Commission (SEC). [1] The formula translates the bond fund's current portfolio income into a standardized yield for reporting and comparison purposes.
The real yield of any bond is the annualized growth rate, less the rate of inflation over the same period. This calculation is often difficult in principle in the case of a nominal bond, because the yields of such a bond are specified for future periods in nominal terms, while the inflation over the period is an unknown rate at the time of the ...
Duration (finance) In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price ...