corporate equivalent

Corporate Equivalent

A comparison of yield between taxable bonds selling at par and tax-exempt bonds selling at a discount. 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 paying 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 corporate equivalent yield measures how much this difference is. See also: Municipals-over-bonds spread.

corporate equivalent

The yield that would need to be realized on a taxable bond selling at par in order to achieve the same aftertax yield to maturity of a bond selling at a premium or discount. For example, a $1,000 par, 10% coupon bond that sells for $900 and is due to mature in five years would provide a yield to maturity of 12.8%. However, after taxes have been paid at a rate of 28% on the $100 gain ($1,000 - $900) and 28% on the $100 annual interest payments, the aftertax yield to maturity is slightly under 10%. The corporate equivalent yield is 0.1/(1 - 0.28), or 13.9%.
References in periodicals archive ?
At a certain point, you become the corporate equivalent of a bratty little kid shouting at another 10-year-old on the playground.
Health insurance: Save [euro]300 Get a corporate equivalent plan, you'd save about [euro]1,900 if you're on a basic plan and there are hacks in the book.
Such firms' bosses often suffer from the corporate equivalent of a colonial cringe.
In fact, some directors are getting the corporate equivalent of combat pay.
In Japan, it is the corporate equivalent of hara-kiri.
In our other feature interview Kirstin Baker, finance and commercial director at HM Treasury discusses why the issues she faces make her key government role as challenging as any corporate equivalent.
Supervalu, once a powerhouse brand, has lost its way--as well as its most recent CEO--and is planning the corporate equivalent of a garage sale.
It is basically the corporate equivalent of vertical integration.
IT WAS rather disappointing, to say the least, to see the work of insolvency practitioners (IPs) characterised in this column a few weeks ago as the corporate equivalent of people who used to go around battlefields in the Middle Ages finishing off the wounded.
At first, this concept struck me as the corporate equivalent of giving a "Do you like me?
So many informatics project champions rush into budget battles armed with the corporate equivalent of rubber bands and paper clips, while their competition has longbows and boiling oil.

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