taxable equivalent yield

taxable equivalent yield definition - business

taxable equivalent yield

The pretax yield that provides the same return as a specified aftertax yield. Taxable equivalent yield is calculated by dividing tax-free yield by the difference obtained from subtracting the applicable tax rate from 1. For example, for an investor who pays taxes at a rate of 40%, an aftertax yield of 6% has a taxable equivalent yield of 0.06/(1 - 0.4) , or 10%.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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