What is the effective interest method of amortization?

July 7, 2024 No Comments

A: The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at a discount; the amount of the bond discount is amortized to interest expense over the bond’s life. Explaining the Effective Interest Rate Method

What happens to the shares of a company that has been liquidated?

July 7, 2024 No Comments

A: The fate of a liquidating company’s shares depends on the type of liquidation the company is undergoing. The most common type of liquidation is bankruptcy, of which there are two types. In a Chapter 11 bankruptcy proceeding, the shares of a company may continue

What is the quickest, easiest and cheapest way to buy a bond?

July 7, 2024 No Comments

A: Bonds usually can be purchased from a bond broker through full service or discount brokerage channels, similar to the way stocks are purchased from a stockbroker. Dealing with a bond broker can be prohibitive to some, however, because many require high minimum initial deposits.

What is a basis point (BPS)?

July 7, 2024 No Comments

A: Basis points, otherwise known as bps or “bips,” are a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal

What is the safest investment?

July 7, 2024 No Comments

Due to the variety of options on the market and the unpredictability of the economic climate, it is difficult to identify one investment that is clearly safest. But some investment categories are significantly safer than others. For example, certificates of deposit (CDs), money market accounts,

What is a stripped bond?

July 7, 2024 No Comments

A: The quick answer to this question is that a stripped bond is a bond that has had its main components broken up into a zero-coupon bond and a series of coupons. To help explain one, let’s first describe a bond. A bond is a

What kind of securities should a risk-averse investor buy?

July 7, 2024 No Comments

A: While most investors are focused on investment options with high rates of return, some individuals are more concerned with the level of risk inherent to specific investment allocations. Investors who are risk-averse are more apt to choose the investment that presents a lower degree

What Is a Triple Tax-Free Municipal Bond?

July 7, 2024 No Comments

A: At its core, a triple tax-free municipal bond is just like any corporate bond — it is a debt instrument, a loan given to a government authority or municipality in order to help it meet certain financial objectives or complete projects in the community. As with

What is accrued interest, and why do I have to pay it when I buy a bond?

July 7, 2024 No Comments

A: A bond represents a debt obligation whereby the owner (the lender) receives compensation in the form of interest payments. These interest payments, known as coupons, are typically paid every six months. During this period the ownership of the bonds can be freely transferred between

What is the difference between a gilt edged bond and a regular bond?

July 7, 2024 No Comments

A: A gilt edged bond is a high-grade bond issue. The term “gilt” is of British origin and originally referred to debt securities issued by the Bank of England. Gilt edged bonds traditionally applied to bonds issued by governments of the United Kingdom, South Africa

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