Effective rate

Is the tax-equivalent rate after adjusting for taxes. For example, a tax-free municipal bond priced at par with a 3% coupon would have an effective rate of 3.95% to a person in the 24% federal tax bracket. And if the state income tax rate is, for example, 6%, the effective rate including federal and state taxes would then be 4.29%.
The formula to calculate the effective tax rate is simply the nominal yield divided by (1 – the tax rate). In the first example, the formula would be 3% divided by (1 – 24%) or 3%/76% = 3.95%. In the second example it would be 3% divided by ((1-(24%+6%))) or 3%/70% = 4.29%.