SIE Exam Question 1009: Answer and Explanation

Question: 1009

What is the taxable equivalent yield of a municipal bond that has a tax-free yield of 6%? Assume the investor is in the 28% tax bracket.

• A. 4.69%
• B. 7.68%
• C. 8.33%
• D. 21.43%

Correct Answer: C

Explanation:

Taxable equivalent yield = 0.06 ÷ (1 - 0.28) = 0.0833 = 8.33%