yield equivalence


yield equivalence
The interest rate at which a tax-exempt bond and a taxable security of similar quality give the investor the same rate of return. Bloomberg Financial Dictionary

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yield equivalence ˌyield eˈquivalence noun [uncountable] FINANCE
when a tax-exempt investment (= one that is not taxed) and a taxable investment of a similar quality provide the same after-tax return, at a particular interest rate

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yield equivalence UK US noun [U] FINANCE
the interest rate that an investor would need on a bond on which tax must be paid to get the same yield in relation to the interest rate for one on which tax is not paid: »

To achieve after tax yield equivalence she needs to find a qualified dividend security yielding 12.5%.


Financial and business terms. 2012.

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