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You’re considering a municipal bond with a yield of 3 percent and a taxable bond with a yield of 4 percent. Tax-equivalent yield = Interest rate / (1 – tax rate)
For instance, Schwab noted that muni ratings remained virtually unchanged in September 2008, even as corporate bonds slid. For investors, that's an important feature, as it means that muni bonds ...
Commissions on other types of bonds, including corporate bonds and municipal bonds, run just $1 per bond, though Schwab does have a $10 minimum here. Schwab also offers access to other types of ...
Municipal money market funds invest primarily in tax-exempt securities. Money market funds can be a good fit for investors looking to benefit from the current interest rate environment or saving ...
A municipal bond, commonly known as a muni, is a bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal bonds is often, but not always, exempt from federal and state income taxation.
There are several ways to invest in municipal bonds, but the most common include purchasing individual municipal bonds, buying muni mutual funds or exchange-traded funds (ETFs) and creating ...
The arbitrage manifests itself in the form of a relatively cheap longer maturity municipal bond, which is a municipal bond that yields significantly more than 65% of a corresponding taxable corporate bond. The steeper slope of the municipal yield curve allows participants to collect more after-tax income from the municipal bond portfolio than ...
*Note: To compare municipal bond funds with taxable funds, investors calculate a taxable equivalent yield, which can be determined by dividing the municipal yield by (1-tax rate). What are high ...