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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.

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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.

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