yield equivalence

Yield equivalence

The interest rate at which a tax-exempt bond and a taxable security of similar quality give the investor the same rate of return.

yield equivalence

Equal aftertax returns on different investments. As an example, for an investor in a 25% marginal tax bracket, a corporate bond with a taxable return of 8% has yield equivalence with a tax-free bond returning 6%.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

References in periodicals archive ?

Several features of this design may be less than optimal to yield equivalence classes: insufficient review of the baseline, starting tests with the most complex relations (transitivity and equivalence; see Adams, Fields, & Verhave, 1993), and lack of symmetry tests.