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28-10-2020
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A taxable bond has a coupon rate of 5.98 percent and a YTM of 5.63 percent. If an investor has a marginal tax rate of 30 percent, what is the equivalent aftertax yield

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Tundexi Tundexi

29-10-2020

Answer:

3.941%

Explanation:

Equivalent after tax yield = Yield to maturity*(1-tax rate)

Equivalent after tax yield = 5.63 *(1 - 30%)

Equivalent after tax yield = 5.63 *(1 - 0.30)

Equivalent after tax yield = 5.63*(0.70)

Equivalent after tax yield = 3.941%

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