Why do Municipal bonds usually offer lower returns than similar taxable corporate bonds? - taxable bonds
In a nutshell ... lower rate of return must be verified by the return to be offset by taxes on a certain level. Some munitions are exempt from federal taxes, some states and some of the city and / or community, and some are of all or a multiple thereof exempt.
When comparing the revenues (under the assumption that only one exemption shared by the federal retrun) the bull by the sum of 1 minus the tax rate. For example, if you are in a + / -24.3% support (only with taxable income of $ 74,200 to $ 154,800) with a yield of 6% on a muni is equivalent to 7.9%.
The calculation is as follows:
(0.06 / (1-0.243) =
(0.06 / 0.757) =
= 0.07926
Or 7.926% and 7.9%
Tuesday, January 5, 2010
Taxable Bonds Why Do Municipal Bonds Usually Offer Lower Returns Than Similar Taxable Corporate Bonds?
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4 comments:
Muni are usually free from taxes. Carefully examine the fiscal status of the Bonds at the federal and state taxes. In addition, bonds have been studied for their safety, AAA is the safest. Links with smaller sizes are called "junk bonds" and lead to much higher returns but greater risk of default.
I do not know, one can say that in my hand. I'm not sure. I think. I looked at your question and found that the Web site. "K?
I do not know, one can say that in my hand. I'm not sure. I think. I looked at your question and found that the Web site. "K?
Corporate bonds are riskier than municipal bonds. You get back a higher rate in exchange for greater risk.
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