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Following Van Horne's [2001] development, we can solve for the nominal, after-tax yield for TIPS by equating today's TIPS price, [P.
Case 2 (the substitution effect) is the case where a lower (higher) future after-tax yield leads more (less) investment in other possibilities (such as bonds with shorter terms-to-maturity or that are tax-exempt).
Subtract the answer from 1, and the result equals the lowest marginal tax rate for which that muni has a better after-tax yield than the Treasury.
e] is sufficiently small (but greater than the after-tax yield from taxable bonds) (for proof see the Appendix).
assuming a 31% investor tax rate and a discount rate equal to the average after-tax yield to an individual investor at which Republic of Austria bonds maturing in approximately 5.
5 percent--for someone in the 31 percent tax bracket, that is equivalent to an after-tax yield of 7.
It is useful to convert a taxable yield to an after-tax yield, and to convert a tax exempt yield to a taxable equivalent yield (or tax exempt equivalent).
Panel A shows that the after-tax yield to maturity equals 7.
After-tax yield is one of the most important variables in evaluating the performance of an investment; any influence that reduces the after-tax yield of an investment without affecting its risk characteristics will make it less attractive.
This preferential tax treatment increases the after-tax yield to bond purchasers over comparable taxable investments and reduces the borrowing costs to state and local governments.
The effective tax rate for the investment income on an asset is, by definition, one minus the ratio of the after-tax yield on the asset to the yield on a fully taxable asset of comparable risk and maturity.
By design, the principal clientele within the market for auction rate preferred stock is comprised of corporate cash managers attempting to maximize the after-tax yield on liquid reserves.