Equivalent Taxable Yield: While taxable bonds normally pay higher interest rates than tax-exempt bonds, they sometimes provide a lower overall yield. Finding the equivalent taxable yield lets you determine the minimum interest rate a taxable bond must pay to equal the yield of a comparable tax-exempt bond. The formula for the equivalent taxable yield is tax-exempt interest rate ÷ (100 – your tax rate). So, for example, if a municipal bond pays an annual interest rate of 7%, and your tax rate is 35%, the equivalent taxable yield would be 7 ÷ (100 – 35) = 10.8%. That means that in order to be as attractive an investment as the 7% municipal bond, a taxable bond would need to pay an annual interest rate of 10.8% or more.

 

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Equivalent Taxable Yield: While taxable bonds normally pay higher interest rates than tax-exempt bonds, they sometimes provide a lower overall yield. Finding the equivalent taxable yield lets you determine the minimu . . . View Full Definition

Stripped Yield: Securities that redistribute the cash flows from the underlying generic MBS collateral into the principal and interest components of the MBS to enhance their attaractiveness to different gro . . . View Full Definition

Sustained Yield: An output of renewable resources that does not impair the productivity of the resource: it implies a balance between harvesting and incremental growth or replenishment.

Steepening Of The Yield Curve: 1/16 (0.0625) of one full point in price. Often used in negotiations to compromise an eighth difference, and in options trading. See: Teenyo.