To find the tax-exempt equivalent yield of a bond, you can use the following formula:

$\text{Tax-Exempt Equivalent Yield} = \text{Taxable Yield} \times (1 - \text{Tax Rate})$

In this case:

• The taxable bond yield is 6%, or 0.06.
• The tax rate is 25%, or 0.25.

Plugging the values into the formula:

$\text{Tax-Exempt Equivalent Yield} = 0.06 \times (1 - 0.25) = 0.06 \times 0.75 = 0.045$

So, the tax-exempt equivalent yield is 4.5%.

This means a tax-free bond offering a 4.5% yield would be equivalent to a taxable bond yielding 6% for someone in the 25% tax bracket.

Would you like more details or have any questions?

Here are five related questions to explore further:

1. What is the difference between taxable and tax-exempt bonds?
2. How does the marginal tax rate impact investment decisions?
3. What are municipal bonds, and why are they often tax-exempt?
4. How do you calculate after-tax returns on various investments?
5. What other factors should you consider when choosing between taxable and tax-exempt bonds?

Tip: When comparing bonds, always consider both the yield and the tax implications to understand the true return.