Comments on: How to Calculate Tax-Equivalent Yield http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 20 Nov 2009 19:56:44 -0800 http://wordpress.org/?v=abc hourly 1 By: tariq http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-440415 tariq Thu, 05 Nov 2009 19:15:19 +0000 http://allthingsfinancialblog.com/?p=1271#comment-440415 so good bu explane withe more detail that understand every one easily.thanks so good bu explane withe more detail that understand every one easily.thanks

]]> By: Andy http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-326021 Andy Wed, 25 Jun 2008 20:56:38 +0000 http://allthingsfinancialblog.com/?p=1271#comment-326021 Here is more info to back up what I've said about #13. http://ricedelman.com/cs/education/article?articleId=232 Here is more info to back up what I’ve said about #13.

http://ricedelman.com/cs/education/article?articleId=232

]]> By: Andy http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-326019 Andy Wed, 25 Jun 2008 20:50:03 +0000 http://allthingsfinancialblog.com/?p=1271#comment-326019 Answer to #13... they should put the minimum down on the condo and take out a 30 year fixed mortgage. The rest of the money should be put in the market with a pretty aggresive Asset Allocation. Here is why: the first several years, their mortgage payments will be mostly interest... which is tax deductible. Also, think about inflation, what seems like a big payment now will not be so big toward the end of the mortgage. There money is much better off in a properly allocated portfolio, especially with a 6.5% or less mortgage. Investing in bonds and other fixed income would be foolish. If you had a 30 year time frame for investing... you would have an allocation closer to 80/20 stocks/bonds. Answer to #13… they should put the minimum down on the condo and take out a 30 year fixed mortgage. The rest of the money should be put in the market with a pretty aggresive Asset Allocation.

Here is why: the first several years, their mortgage payments will be mostly interest… which is tax deductible. Also, think about inflation, what seems like a big payment now will not be so big toward the end of the mortgage. There money is much better off in a properly allocated portfolio, especially with a 6.5% or less mortgage. Investing in bonds and other fixed income would be foolish. If you had a 30 year time frame for investing… you would have an allocation closer to 80/20 stocks/bonds.

]]> By: crystal kingsbury http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-324870 crystal kingsbury Sun, 22 Jun 2008 20:19:53 +0000 http://allthingsfinancialblog.com/?p=1271#comment-324870 did anyone have the answer to question of Phyllis Michaux (#13) did anyone have the answer to question of Phyllis Michaux (#13)

]]> By: Martha http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-263937 Martha Tue, 01 Apr 2008 16:26:47 +0000 http://allthingsfinancialblog.com/?p=1271#comment-263937 Did anybody have an answer to Phyllis Michaux (#13) posting on January 19th, 2008 on calculating the after-tax yields on certain investments? I have a similar homework problem. I think the 2003 Act lowered the tax rates on stock dividends and capital gains. Did anybody have an answer to Phyllis Michaux (#13) posting on January 19th, 2008 on calculating the after-tax yields on certain investments? I have a similar homework problem. I think the 2003 Act lowered the tax rates on stock dividends and capital gains.

]]> By: Bob http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-240544 Bob Sun, 24 Feb 2008 18:57:12 +0000 http://allthingsfinancialblog.com/?p=1271#comment-240544 How do you calculate a tax-quivalent rate of return for an annuity with a exclusion ratio? In other words part of the return is taxable and the rest isn't (excluded). How do you calculate a tax-quivalent rate of return for an annuity with a exclusion ratio? In other words part of the return is taxable and the rest isn’t (excluded).

]]> By: Phyllis Michaux http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-214056 Phyllis Michaux Sat, 19 Jan 2008 16:07:26 +0000 http://allthingsfinancialblog.com/?p=1271#comment-214056 Bernie and Pam Britten are a young married couple beginning careers and establishing a household. They will each make about $50,000 next year and will have accumulated about $40,000 to invest. They now rent an apartment but are considering purchasing a condominium for $100,000. If they do, a down payment of $10,000 will be required. They have discussed their situation with Lew McCarthy, an investment advisor and personal friend, and he has recommended the following investments: The condominium - expected annual increase in market value = 5%. Municipal bonds - expected annual yield = 5%. High-yield corporate stocks - expected dividend yield = 8%. Savings account in a commercial bank-expected annual yield = 3%. High-growth common stocks - expected annual increase in market value = 10%; expected dividend yield = 0. Calculate the after-tax yields on the foregoing investments, assuming the Brittens have a 28% marginal tax rate (based on Public Law 108-27, The Jobs and Growth Tax Relief Reconciliation Act of 2003). How would you recommend the Brittens invest their $40,000? Explain your answer. Bernie and Pam Britten are a young married couple beginning careers and establishing a household. They will each make about $50,000 next year and will have accumulated about $40,000 to invest. They now rent an apartment but are considering purchasing a condominium for $100,000. If they do, a down payment of $10,000 will be required.

They have discussed their situation with Lew McCarthy, an investment advisor and personal friend, and he has recommended the following investments:

The condominium – expected annual increase in market value = 5%.
Municipal bonds – expected annual yield = 5%.
High-yield corporate stocks – expected dividend yield = 8%.
Savings account in a commercial bank-expected annual yield = 3%.
High-growth common stocks – expected annual increase in market value = 10%; expected dividend yield = 0.
Calculate the after-tax yields on the foregoing investments, assuming the Brittens have a 28% marginal tax rate (based on Public Law 108-27, The Jobs and Growth Tax Relief Reconciliation Act of 2003).
How would you recommend the Brittens invest their $40,000? Explain your answer.

]]> By: FIRE Finance http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-44288 FIRE Finance Sat, 11 Nov 2006 18:40:17 +0000 http://allthingsfinancialblog.com/?p=1271#comment-44288 <strong>We Catch Up With Carnival Of Personal Finance #71</strong> We are almost always up to date with our readings of Carnivals and Festivals on Personal finance. However due to a movie festival at our place over a weekend we had missed reading Carnival Of Personal Finance #71 hosted at FatPitchFinancials. This wa... We Catch Up With Carnival Of Personal Finance #71

We are almost always up to date with our readings of Carnivals and Festivals on Personal finance. However due to a movie festival at our place over a weekend we had missed reading Carnival Of Personal Finance #71 hosted at FatPitchFinancials. This wa…

]]> By: Send Money Online » Carnival of Personal Finance #71 http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-40806 Send Money Online » Carnival of Personal Finance #71 Mon, 06 Nov 2006 17:08:39 +0000 http://allthingsfinancialblog.com/?p=1271#comment-40806 [...] How to Calculate Tax-Equivalent Yield at AllFinancialMatters * Editor’s Choice * A good post on how to determine if a tax free investment is as good as a taxable bond investment. [...] [...] How to Calculate Tax-Equivalent Yield at AllFinancialMatters * Editor’s Choice * A good post on how to determine if a tax free investment is as good as a taxable bond investment. [...]

]]> By: samerwriter » Samerwriter’s Saturday http://allfinancialmatters.com/2006/10/20/how-to-calculate-tax-equivalent-yield/comment-page-1/#comment-37044 samerwriter » Samerwriter’s Saturday Sat, 28 Oct 2006 19:28:07 +0000 http://allthingsfinancialblog.com/?p=1271#comment-37044 [...] It’s pretty easy to figure out if you’re best off in the Tax Exempt fund or the taxable fund. You just need to know your tax bracket. There are online calculators, or JLP shows the algorithm here. I keep a table next to my computer showing the tax-equivalent yield at 1%, then just multiply that yield by the actual tax-exempt yield I’m looking at to decide if I’m better off in a tax-exempt fund or a taxable fund: [...] [...] It’s pretty easy to figure out if you’re best off in the Tax Exempt fund or the taxable fund. You just need to know your tax bracket. There are online calculators, or JLP shows the algorithm here. I keep a table next to my computer showing the tax-equivalent yield at 1%, then just multiply that yield by the actual tax-exempt yield I’m looking at to decide if I’m better off in a tax-exempt fund or a taxable fund: [...]

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