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Romashka [77]
2 years ago
14

A bond issued by the state of Alabama is priced to yield 6.40%. If you are in the 30% tax bracket, this bond would provide you w

ith an equivalent taxable yield of _________.
a. 4.48%
b. 7.40%
c. 9.14%
d. None of these options
Business
1 answer:
jek_recluse [69]2 years ago
8 0

If you are in the 30% tax bracket, this bond would provide you with an equivalent taxable yield of c. 9.14%.

<h3>Equivalent taxable yield</h3>

Using this formula

Equivalent taxable yield=Bond price/(1-Tax rate)

Where:

Bond price=6.40%

Tax rate=30%

Let plug in the formula

Equivalent taxable yield= 6.40%/(1 - 0.30)

Equivalent taxable yield=6.40%/70%

Equivalent taxable yield=9.14%

Inconclusion if you are in the 30% tax bracket, this bond would provide you with an equivalent taxable yield of c. 9.14%.

Learn more about equivalent taxable yield here:brainly.com/question/25656290

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