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Investments glossary

Yield Equivalence


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Quotes of the day:

Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil

— Golda Meir

Yield equivalence is the interest rate on a taxable security that would generate a return equivalent to the return of a tax-exempt security, and vice versa. Yield equivalence is important to municipal bond investors who want to know if the tax savings of their muni bonds will make up for the lower yields relative to similar duration taxable securities. Yield equivalence can be calculated using the following equations.

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