CFA Practice Question

CFA Practice Question

Suppose a Municipal bond trades at par and has a coupon rate of 5%. The tax rate on taxable bonds is 30%. Then the TEY (tax equivalent yield) is:
A. 16.7%
B. 3.5%
C. 7.14%
Explanation: TEY = 5% / (1 - 0.30) = 7.14%

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