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This return shows the investor which taxable yield calculation will yield the same return as a tax-free bond, and allows comparisons between similar bonds.
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You can calculate using the following formula- Tax-equivalent consideration = Tax-free consideration / (1 - Marginal tax rate)
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If the investor is in the 37% tax bracket, the fully taxable equivalent yield should be: TEY = 0.08 (1 - 0.37) = 12.70%.
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