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Bonds can provide passive income, some of which may be tax-free if you're investing in municipal bonds. The tax-equivalent yield formula can be a useful tool for comparing taxable and tax-free ...
Muni bonds are a more attractive option for investors in high-tax states and cities, so investors in those areas should be sure to calculate the tax-equivalent yield on potential muni investments.
The bond equivalent yield or BEY for an investment is a calculated annual percentage yield for an investment, which may not pay out yearly. It is not to be confused with a bond's coupon rate. This allows investments with different payout frequencies to be compared. [1]
Coupon (or Nominal) Yield – Suppose someone buys a one-year bond with a face value of $1,000 bond and an annual coupon of $50. Holding that bond for one year (to maturity) would result in a ...
The taxable equivalent yield on a municipal bond is calculated as follows. Where r m = interest rate of municipal bond, r c = interest rate of comparable corporate bond and t = investor's tax bracket (also known as marginal tax rate): [35] = ()
yield to put assumes that the bondholder sells the bond back to the issuer at the first opportunity; and; yield to worst is the lowest of the yield to all possible call dates, yield to all possible put dates and yield to maturity. [7] Par yield assumes that the security's market price is equal to par value (also known as face value or nominal ...
Bonds held in tax-advantaged accounts, ... You may also want to use a tax-equivalent yield calculator to compare taxable bonds with tax-advantaged bonds. Show comments. Advertisement.
Yield to put (YTP): same as yield to call, but when the bond holder has the option to sell the bond back to the issuer at a fixed price on specified date. Yield to worst (YTW): when a bond is callable, puttable, exchangeable, or has other features, the yield to worst is the lowest yield of yield to maturity, yield to call, yield to put, and others.
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