Chapter 2

Equivalent taxable yield: r = rm /(1 – t) After tax return: rm = r*(1 – t) Example: suppose your marginal tax rate is 28%. Would you prefer to earn a 6% taxable return or 4% tax-free yield? ... It is the Capital Market Line (CML) formula . CML has the risk-free rate as the intercept and the reward-to-variability ratio as the slope Two-fund ... ................
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