A 5.5%, 20-year municipal bond is currently priced to yield 7.2%. For a taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of

A) 8.46%.
B) 10.75%.
C) 12.40%.
D) 3.58%.

Marginal Tax Bracket

The tax rate that applies to the last dollar of the taxpayer's income, indicating the percentage of tax applied to your income for each tax bracket in which you qualify.

Equivalent Taxable Yield

The pretax yield on a taxable bond providing an after-tax yield equal to the rate on a tax-exempt municipal bond.