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Accounting > Tax Equivalent Yield
The following information is about Tax Equivalent Yield.
Tax Equivalent Yield Defined
is the yield that must be offered before factoring in taxes so that an investment pays off a certain after-tax yield. This measure is often necessary to compare taxable and tax-free investmentssince tax-free issues tend to have lower pre-tax yields due to the fact that the investment's proceeds will not be reduced by taxes. Tax equivalent yield is equal to required after-tax yield divided by (1 minus the tax rate).
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