corporate equivalent yield Definition

corporate equivalent yield

Definition

Comparison of the after-tax yield of two different bonds, one corporate bond selling at par and one government bond selling at a discount. These are used for comparison because government bonds usually have lower interest rates but are subject to lower - and sometimes nonexistent - taxes, while corporate bonds have higher interest rates but are subject to higher taxes. Calculated by: (after tax yield to maturity)/(1-tax rate).

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