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What is the EQ yield of a municipal bond?

Answer:

The taxable equivalent yield for a muni bond shows what you would have to earn on a taxable bond to equal the after tax return on a muni bond. Example, a muni bond has a EQ yield of 5% and you pay 20% federal income tax. The muni would actually pay interest of 4%. This is because if a taxable bond pays 5% and you pay 20% taxes, you would actually get after tax 4% (20% of 5% is 1%. 5%-1%=4%).

First answer by ID1250047690. Last edit by ID1250047690. Question popularity: 9 [recommend question].

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