Solved: Higher after-tax yield on the taxable security, Accounting Basics

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Higher after-tax yield on the taxable security

Problem:

Jacqui Velasquez, a treasury assistant, is considering the purchase of municipal notes but needs to compare their tax-advantaged yield with the yield on taxable securities. The company's marginal federal tax rate is 34%.

Q1. What advice would you give Jacqui about comparing these securities?

Q2. If she is considering a muni that is yielding 5%, how high must the taxable rate be to provide a higher after-tax yield on the taxable security?

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Accounting Basics: Higher after-tax yield on the taxable security

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Accounting Basics: Higher after-tax yield on the taxable security

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