tax-equivalent yield

(redirected from Tax Equivalent Yield)

Tax-equivalent yield

The pre-tax yield required from a taxable bond in order to equal the tax-free yield of a municipal bond.

Tax-Equivalent Yield

The yield of a taxable investment that equals the yield of a tax-free investment with a lower stated yield. A corporate bond yields less than its stated interest rate because of taxation whereas a tax-exempt municipal bond does not. Thus, a municipal bond that pays a lower interest rate will often net the bondholder more than a corporate bond with a slightly higher interest rate, depending upon one's tax bracket. The tax equivalent yield is the extra yield required on a corporate bond to equal the post-tax yield of a municipal bond. See also: Municipals-over-bonds spread, After-tax basis.

tax-equivalent yield

The pretax yield that provides the same return as a specified aftertax yield. Tax-equivalent yield is calculated by dividing tax-free yield by the difference obtained from subtracting the applicable tax rate from 1. For example, for an investor who pays taxes at a rate of 40%, an aftertax yield of 6% has a tax-equivalent yield of 0.06/(1 - 0.4), or 10%.
References in periodicals archive ?
The tax equivalent yield adjustment to interest earned on loans was $989 thousand and $518 thousand for the three months ended September 30, 2015 and 2014, respectively.
6 percent would clearly be better off investing in tax-free municipal bonds, since the tax equivalent yield of 3.
94% tax equivalent yield at the highest income tax bracket (35% as of May).
The site will include a tax equivalent yield calculator and offer investment strategies to consider in a changing tax environment.
The tax equivalent yield adjustment to interest earned on loans was $666 thousand and $425 thousand for the three months ended June 30, 2015 and 2014, respectively.
The tax equivalent yield on the Company's investment portfolio in the third quarter of 2007 was 5.
The tax equivalent yield on average loans for the quarters ended June 30 and March 31, 2015 was 4.
The average tax equivalent yield increased 68 basis points to 5.
Net interest margin - fully tax equivalent yield [sup.
The tax equivalent yield adjustment to interest earned on loans was $665 thousand and $357 thousand for the three months ended March 31, 2015 and 2014, respectively.

Full browser ?