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%.
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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.
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I'm repeating myself, but the most critical point is that the presenter should be the corporate equivalent of Superman or Wonder Woman.
He would prefer not to daily don this neck-constricting apparel item, which is the corporate equivalent of a noose.
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