Fixed Income Investments  After Tax Yield of a Taxable Security
The aftertax yield is the yield on a taxable bond after federal income taxes are paid. It is computed with the following formula.
Formula 14.5
Aftertax yield = pretax yield x (1 marginal rate) 
The marginal rate will vary depending on the tax bracket the investor is at that given time.
Example: Taxable Bond Yield
Taxable bond yield is 7.5%
The Marginal tax rate for this investor is 31%
Answer:
Aftertax yield = .075 x (1.31)
= .05175
= 5.175%
TaxEquivalent Yield
The taxequivalent yield is the yield that must be offered on a taxable bond issue to give the same aftertax yield as a taxexempt issue. It is computed with the following formula.
Formula 14.6
Taxableequivalent yield = taxexempt yield / (1 marginal tax rate) 
Example: TaxExempt Yield
Tax exempt yield = 5.00%
Marginal Tax Rate = 31%
Answer:
Taxableequivalent yield = .05 / (1.31)
= .05 / .69
= .072464
= 7.2464 %
This means that a taxable issue must yield more than 7.25 % for the investor at the 31% tax bracket in order to beat the 5% yield offer in the taxexempt bond.
Notice that the higher the marginal tax rate, the higher the taxable equivalent yield would be needed in the taxable bond market. 

Bonds & Fixed Income
Calculating the TaxEquivalent Yield
Taxequivalent yield is the pretax yield a taxable bond must possess for its yield to equal that of a taxfree municipal bond. 
Active Trading
Finding The Best Yields
Using yields to supplement earnings can mean big bucks, with the right strategy. 
Professionals
Tax Implications
FINRA Series 6 Exam Study Guide  Tax Implications. In this section, Tax Equivalent Yield. After tax Yield = Muni Bond Yield/100%customer's tax bracket rate. 
Professionals
Bond Yields
A bond’s yield is the investor’s return for holding the bond. Many factors affect the yield that an investor will receive from a bond such as: Current interest rates Term of the bond ... 
Professionals
Typical Yield Measures
CFA Level 1  Typical Yield Measures. Learn the various measures of yield on a bond. Includes yield to first call, first par call, put, refunding and yield to maturity. 
Retirement
3 TaxReduction Strategies for HighNetWorth Investors
Learn about three tax strategies that reduce taxable income and minimize the share of taxes paid on employersponsored and individual investment accounts. 
Investing
Understanding the Different Types of Bond Yields
Any investor, private or institutional, should be aware of the diverse types and calculations of bond yields before an actual investment. 
Bonds & Fixed Income
Bond Yields: Current Yield And YTM
A bond's current yield, also called "bond yield," is the interest it pays annually divided by the bond's price. A stock's current yield, also called "dividend yield," is the sum of its annual ... 
Retirement
Bond Basics: Yield, Price And Other Confusion
Investopedia Explains: Bond yield, Bond price, yield to maturity, the link between price and yield and bond price in the market. 
Bonds & Fixed Income
Calculating Yield to Worst
Yield to worst is the lowest possible yield on a bond that may be called in the future.

TaxEquivalent Yield
The pretax yield that a taxable bond needs to possess for its ... 
AfterTax Basis
A comparison of the net yields produced by taxable and taxexempt ... 
Fully Taxable Equivalent Yield
The yield on a municipal bond, when the effect of reduced taxes ... 
Yield Equivalence
The interest rate on a taxable security that would render a return ... 
TaxExempt Security
A security in which the income produced is free from federal, ... 
Bond Yield
The amount of return an investor will realize on a bond. Several ...

What is the difference between the yield of stock and the yield of a bond?
Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond ... Read Answer >> 
Dennis, a resident of Pennsylvania, bought a U.S. Treasury Bond which pays 7% interest ...
The correct answer is d) The interest from U.S. Treasury Bonds is exempt from state and local taxes, however; it is subject ... Read Answer >> 
What is the importance of calculating tax equivalent bond yield?
Calculate the taxequivalent yield of taxfree municipal bonds to compare with taxable bonds. Find out if the tax savings ... Read Answer >> 
What are the different formations of yield curves?
Find out more about the yield curve and yield curve formations, what yield curves measure and the three main types of yield ... Read Answer >> 
Can I use the current yield to compare a bond to an equity investment?
Learn about the different types of yield measurements for stocks and bonds, and find out how to make careful comparisons ... Read Answer >> 
What is the difference between yield and rate of return?
Read about the differences between yield and rate of return. See why many novice investors often struggle more with the concept ... Read Answer >>