TAX EQUIVALENT YIELD Definition

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TAX EQUIVALENT YIELD 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 investments, since tax-free issues tend to have lower pre-tax yields due to the fact that the investments 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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NEGATIVE CONTRIBUTOR is any item, activity, or cost that offsets attainment of positive results, e.g., a rise in unemployment and its effect upon the economy.

VERIFIABILITY is where the fact is capable of being tested (verified or falsified) by experiment or observation.

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