6.77% is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.4 percent for an investor in the 35 percent marginal tax bracket.
Municipal bonds are tax exempt, thus the after-tax yield is the same as the pre-tax yield, which is 4.4%.
Given a 35% tax rate, the taxable equivalent yield is such that: taxable equivalent yield *(1 - 35%) = 4.4% taxable equivalent yield = 6.77%.
The tax-equivalent yield is the pretax yield required for a taxable bond's yield to be equivalent to that of a tax-free municipal bond.
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