A VALUABLE TOOL FOR CHOOSING WHETHER TO BUY MUNICIPAL BONDS

With the equations we have shared, you should be able to compare the yields of municipal bonds with those of taxable bonds. This information will help you determine whether gains from the higher interest rates on taxable bonds will be greater than the tax bite on them. An understanding of how your tax bracket affects your taxable equivalent yield will also help you decide whether municipal bonds or municipal bond mutual funds are right for you.

For more information about bond investing, see the related tutorials in the Encyclopedia.