Fully Taxable Equivalent Yield

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Dictionary Says

Definition of 'Fully Taxable Equivalent Yield'

The yield on a municipal bond, when the effect of reduced taxes are taken into account. The fully taxable equivalent yield shows what yield a fully taxable bond would have to give, in order to be equivalent to a tax free municipal bond. The yield is calculated as:

Yield on a Municipal Bond
1 - Tax Rate

Investopedia Says

Investopedia explains 'Fully Taxable Equivalent Yield'

Investors use the fully taxable equivalent yield to determine whether they will get the same value from a municipal bond, as they would from a taxable bond. Yields on municipal bonds are generally lower than taxable bonds, so the tax implications of having the municipal bond, must outweigh the gap between the two bond types.

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'Fully Taxable Equivalent Yield'

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    ... Taxable equivalent yield = .04/(1-.25) = .04/.75 = .0533 or 5.33% You can then ... Others,
    known as private-purpose bonds, are fully taxable, unless their use is ...

  • Taxation Rules For Bond Investors

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    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/after-tax-yield-taxable-security.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a ... 14.32
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  • Series 7 Study Guide - Municipal Securities - Muni Taxes ...

    http://www.investopedia.com/exam-guide/series-7/municipal-securities/muni-tax.asp
    ... If your client is in a high tax bracket, the taxable equivalent yield on municipal
    securities can be much higher than on fully taxable securities. ...

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    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a ... 14.32
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    ... bonds, while the purchase of equivalent premium bonds ... can work wonders for your taxable
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