Tax-Equivalent Yield
InvestingThe pretax yield a taxable bond must offer to equal the after-tax yield of a tax-exempt municipal bond.
Example
Example: Consider an investor building a $100,000 portfolio. Tax-Equivalent Yield — the pretax yield a taxable bond must offer to equal the after-tax yield of a tax-exempt — directly affects investment strategy and long-term returns. Getting this concept right can mean tens of thousands of dollars in difference over a 20-year period. Model your portfolio with our investment calculator.