tax exempt muni bond = 3.86% five year treasury = 4.86% what is yield ratio?
Also, the tax rate is 32%. From what I understand, the definition of yield ration is: The yield ratio is the ratio of the yields on the two bonds. Higher yield / Lower yield In this example, the muni bond is the HIGHER yield because the tax equivalent yield (3.86 / (1-tax) = 5.68. Therefore, the higher yielding bond in this question is the muni bond. So the yield ratio is 3.86 / 4.86 = .79
ciao strangedays, the actual answer is 3.86 / 4.86 = .79