Redemption yields on redeemable securities may conveniently be found with the aid of tables of Bond Values. These tables make no allowance for the fact that income tax is payable on the full dividend payments with no adjustment for profit or loss on redemption.

Those investors who are taxed on the full dividends require to know the net yield after allowing for tax, or, more usually, the gross equivalent of this net yield, commonly known as the “equivalent gross yield”. It is often inconvenient to deduct tax from the dividend rate and find the net yield direct, as the net dividend frequently does not coincide with the rates for which tables are available. There is, however, a very convenient and extremely accurate approximation to the required equivalent gross yield which is as follows:

To find the equivalent gross yield, reduce the unexpired term in proportion to the rate of tax payable and enter the table for the full nominal dividend rate.