An investor recently purchased a corporate bond which yields 11.5%. The investor is in the 32% combined federal and stat...
An investor recently purchased a corporate bond which yields 11.5%. The investor is in the 32% combined federal and state tax bracket. What is the bond's after-tax yield? Round your answer to two decimal places.
Homework Answers
| After tax yield = Before tax yield *(1-tc) | ||||
| where tc is the tax rate that is 32%. | ||||
| The before tax yield is 11.5%. | ||||
| After tax yield = .115*(1-.32) | ||||
| After tax yield = .115*(1-.32) | ||||
| After tax yield = .115*(.68) | ||||
| After tax yield = .0782 | ||||
| The bond's after-tax yield is 7.82%. | ||||
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