What is the tax equivalent yield of a tax-exempt investment earning 9.40 percent? (Assume a 22 percent tax rate.)

Note: Enter your answer as a percent rounded to 2 decimal places.

To calculate the tax-equivalent yield, you can use the following formula:

\[
\text{Tax Equivalent Yield} = \frac{\text{Tax-Exempt Yield}}{1 - \text{Tax Rate}}
\]

Given:
- Tax-Exempt Yield = 9.40% 
- Tax Rate = 22% or 0.22

Substitute the values into the formula:

\[
\text{Tax Equivalent Yield} = \frac{9.40\%}{1 - 0.22} = \frac{9.40\%}{0.78}
\]

Now, perform the division:

\[
\text{Tax Equivalent Yield} = 12.05\%
\]

So, the tax-equivalent yield is **12.05%**.

Would you like more details or have any questions about this calculation?

Here are some related questions to consider:
1. How does the tax rate affect the tax-equivalent yield?
2. What is the tax-equivalent yield if the tax rate is 30%?
3. How would a higher tax-exempt yield impact the tax-equivalent yield?
4. What are the benefits of tax-exempt investments?
5. Can tax-equivalent yields be applied to different types of tax rates, such as state and federal?

**Tip:** When comparing tax-exempt and taxable investments, always calculate the tax-equivalent yield to understand the true value of the investment relative to your tax situation.

What is the tax equivalent yield of a tax-exempt investment earning 9.40 percent? (Assume a 22 percent tax rate.)

Learn how to calculate the tax equivalent yield for a tax-exempt investment earning 9.40% with a 22% tax rate. This guide walks you through the formula and provides a step-by-step solution to understand the relationship between tax-exempt and taxable yields. Suitable for college-level or advanced high school students.

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