Taxable Equivalent Yield Calculator

FINANCIAL CALCULATORS Taxable Equivalent Yield Calculator Calculate the taxable equivalent yield of a tax-exempt municipal bond for investors.
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What is the Taxable Equivalent Yield Calculator & How does it work?
The Taxable Equivalent Yield (TEY) is a measure used to compare the return on a tax-exempt municipal bond with that of a taxable bond. It helps investors understand how much they would need to earn from a taxable investment to match the after-tax yield of a tax-exempt bond.
The formula for TEY is:
TEY = frac{Tax-Exempt Yield}{1 – Tax Rate}
Tax-Exempt Yield = The yield on the tax-exempt bond
Tax Rate = Your marginal federal income tax rate (expressed as a decimal)
This calculation assumes that the investor is in the same tax bracket and that the only difference between the two investments is their tax status.
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Frequently Asked Questions
What is Taxable Equivalent Yield?
Taxable Equivalent Yield (TEY) is a measure that helps investors compare the return on a tax-exempt municipal bond with that of a taxable bond.
How do I calculate TEY?
To calculate TEY, divide the Tax-Exempt Yield by one minus your marginal federal income tax rate (expressed as a decimal).
Why is TEY important for investors?
TEY helps investors understand how much they would need to earn from a taxable investment to match the after-tax yield of a tax-exempt bond.
What does Tax-Exempt Yield refer to in this context?
Tax-Exempt Yield refers to the yield on the tax-exempt municipal bond you are comparing.
How do I determine my marginal federal income tax rate for TEY calculation?
Your marginal federal income tax rate is the highest tax bracket you fall into. You can find this information on your tax return or by consulting a tax professional.
Can TEY be used for state and local taxes too?
The formula provided calculates only the federal tax equivalent yield. For state and local taxes, you would need to adjust the calculation accordingly using your respective tax rates.
What assumptions does the TEY calculator make?
This calculation assumes that all other factors are equal between the taxable and tax-exempt bonds, such as credit risk and maturity.

Results are for informational purposes only and do not constitute professional advice.