Taxable and Tax-Free Equivalence of Interest Rate Yields: A Brief Note

Cebula, Richard (2010): Taxable and Tax-Free Equivalence of Interest Rate Yields: A Brief Note. Published in: Journal of Economics and Finance Education , Vol. 10, No. 1 (15 August 2011): pp. 83-84.

Abstract

This paper demonstrates the appropriate way in which to translate a tax-free interest rate yield into an equivalent taxable interest yield when there is not only a federal income tax to account for but also a state income tax as well. The results shown indicate the importance of allowing for state income tax rates when computing interest rate yield equivalence.

• Item Type: MPRA Paper
• Language: English
• Keywords: tax-free interest rate yields; taxable interest rate yields; equivalence computations; state income tax rates
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H74 - State and Local Borrowing

References

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