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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 ...
For example, imagine you pay federal tax at a 24 percent rate and state tax at a rate of 6 percent, and the municipal bond offers a yield of 3 percent. The tax-equivalent yield of the muni would ...
The bonds in this fund are generally exempt from federal income taxes, which is why the stated yield is lower than taxable funds. Yield: 4.27 percent. Expense ratio: 0.32 percent. Fund assets: $3. ...
Comparing the yield on a municipal bond to that of a corporate or U.S. Treasury bond can be misleading, because of differing tax treatment of the income from the two types of securities. For that reason, investors use the concept of taxable equivalent yield to compare municipal and corporate or Treasury bonds. The taxable equivalent yield on a ...
Municipal bond arbitrage, also called municipal bond relative value arbitrage, municipal arbitrage, or just muni arb, generally consists of building a leveraged portfolio of high-quality, tax-exempt municipal bonds and simultaneously hedging the duration risk in that municipal bond portfolio by shorting the equivalent taxable corporate bonds.
The real yield of any bond is the annualized growth rate, less the rate of inflation over the same period. This calculation is often difficult in principle in the case of a nominal bond, because the yields of such a bond are specified for future periods in nominal terms, while the inflation over the period is an unknown rate at the time of the ...
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.
Calculate your taxable income: To figure this out, you take your AGI and subtract all of your qualifying deductions. Or use a tax filing software to calculate the deductions for you.