June Tavia Is Trying to Calculate the Taxable Equivalent Yield

question 16

Multiple Choice

June Tavia is trying to calculate the taxable equivalent yield for a municipal bond.If the bond she owns pays 4.5 percent interest and she is in the 25 percent tax bracket,what is the taxable-equivalent yield?

• A)4.50 percent
• B)5.50 percent
• C)6.00 percent
• D)7.72 percent
• E)6.93 percent

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Definitions:

Factor of Production

An economic resource used in the production of goods and services, including labor, capital, land, and entrepreneurship.

Market

A group of buyers and sellers of a particular good or service.

Diminishing

A principle often referring to diminishing returns, where additional inputs result in progressively smaller increases in output.

Marginal Product

The additional output resulting from the use of one more unit of a production input, holding all other inputs constant.