What Is the Tax-Equivalent Yield of a Double Tax-Free 4

question 96

Multiple Choice

What is the tax-equivalent yield of a double tax-free 4% municipal bond if the investor is in the 33% federal and 6% state tax brackets?

• A)6.35%
• B)5.97%
• C)6.56%
• D)4.26%

---

Definitions:

Trust Fund

A legal arrangement where assets are held and managed by one party for the benefit of another, often used for inheritance, to manage charity donations, or to protect assets.

Interest Rate

The fraction of a loan incurred as interest by the borrower, commonly indicated as a yearly percentage.

Grandchildren

The children of one's children, forming the third generation in a family lineage.

Future Value Factor

A factor used to calculate the future value of a cash flow at a certain rate of interest over a specific number of periods.