What is Tax Equivalent Yield?
Tax Equivalent Yield Calculator: The Tax Equivalent Yield (TEY) is a financial calculation used by investors to compare the returns of tax-free investments, such as municipal bonds, with taxable investments. This helps investors decide which investment option offers the best after-tax return.
Calculate Your Tax Equivalent Yield
Enter the tax-free yield and your marginal tax rate to calculate the equivalent taxable yield.
How to Use the Calculator?
- Input the Tax-Free Yield (percentage) in the first box.
- Enter your Marginal Tax Rate (percentage) in the second box.
- Click the "Calculate" button to see the equivalent taxable yield.
Formula for Tax Equivalent Yield
The formula to calculate Tax Equivalent Yield is:
Tax Equivalent Yield (TEY) = Tax-Free Yield / (1 - Marginal Tax Rate)
For example, if the tax-free yield is 3% and your marginal tax rate is 25%, the calculation would be:
TEY = 3 / (1 - 0.25) = 4%