A:

A. 8.0%

B. 22.2%

C. 9.3%

D. 12.5%






Correct answer: D

"A" divides 1-minus-tax-rate by the tax-exempt yield, instead of vice versa, and the sloppy mathematician will not notice the order-of-magnitude problem and will read "8" as "8%". "B" divides the tax-exempt yield by the tax rate, not 1-minus-tax-rate. "C" is just a guess.



RELATED FAQS

  1. What are the main risks to the economy of a country that has implemented a policy ...

    Learn about the main risks to a country that has implemented a policy of austerity. Austerity implies cutting government ...
  2. What is meant by off-the-run treasuries?

    Understand what is meant by off-the-run Treasuries, along with the key differences in yield that commonly occur between on- ...
  3. How can I tell if a security is considered investment grade?

    Understand how Standard & Poor's and Moody's rates securities. Learn what types of ratings types go into evaluating the investment ...
  4. What is the difference between a bank guarantee and a bond?

    Understand what a bank guarantee is and what a bond is, and which one is a debt instrument. Learn the differences between ...
RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt ...
  3. Series I Bond

    A non-marketable, interest-bearing U.S. government savings bond ...
  4. Safe Haven

    An investment that is expected to retain its value or even increase ...
  5. Bond Resolution

    1. A document used with government bonds, especially general ...
  6. Fully Taxable Equivalent Yield

    The yield on a municipal bond, when the effect of reduced taxes ...

You May Also Like

Related Articles
  1. Mutual Funds & ETFs

    How To Short The U.S. Bond Market

  2. Mutual Funds & ETFs

    The EMAG Emerging Mkts Bond ETF: Worth ...

  3. Investing

    Feeling Risk-Averse? Consider These ...

  4. Mutual Funds & ETFs

    Is the DSUM Yuan Fixed Income ETF a ...

  5. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!