6% taxable return is equivalent to an after-tax return of 6%(1 .30) = 4.2%. Therefore, you would be better off in the taxable bond. The equivalent taxable yield of the tax-free bond is 4%/(1 .3) = 5.71%. So a taxable bond would have to pay a 5.71% yield to provide the same after-tax return as a tax-free bond offering a 4% yield