tax equivalent yield
Definition
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 investments, since tax-free issues tend 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).
Use this term in a sentence
“ You should try and make sure that you are using any tax equivalent yield you may get to your advantage. ”
“ The tax equivalent yield was a very important part of the process and we had to pay a lot of attention to it. ”
“ The tax equivalent yield was calculated for the project because, at the end of the day, we are only concerned with after tax profits. ”
