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The price and output that yield maximum profits before tax will yield maximum profits after tax.
As a result, municipal bonds, which traditionally yield 75to80percentent of what equivalent Treasuries pay out, are close to Treasury yields on a before-tax basis.
It now yields 2.26percentt before taxes.
Today, however, the tax advantage of municipals makes sense for people in any tax bracket, largely because the yield of municipal securities with maturities of five years or more is nearly the same as the before-tax yield on comparable United States Treasury securities for the first time in more than a decade.
In a rare shift in yield relationships, the typical tax-exempt bond has been providing a higher return, even before tax considerations, than Treasury bonds of similar maturity.
(If one stops at 2007, before the recession, the same comparison yields an increase of 9.8 points before tax and 9.3 after).
The objective function was the maximisation of before-tax profit.
Since the yield on tax-free bonds is greater, you should buy tax-free bonds.
Before tax.
Yeah, just before tax day.
Average pay before tax: £133,868.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com