Question 181198
well municipal bonds are usually tax free. On that assumption you take the interest rate of 6% and divide by (1 minus the % tax bracket your in), which in this case is 25%. We are looking for the PRE TAX yield which will be higher, not lower. The whole idea of this is to compare it to an investement that is taxed, like a treasurey bond, so that you can compare yields.
:
1-.25=.75.
:
6% /(.75)= 8% so the true yield of this, if tax free, is 8%