How are the Equity Market and Fixed-Income Market Different?

July 7, 2024 No Comments

A: The major differences between equity and fixed income markets are the way they make profits for investors, the manner in which they are traded, their representation of financial interest and their levels of risk. Equity Markets Equity markets involve the purchase and sales of

How are treasury bills (T-bills) taxed?

July 7, 2024 No Comments

A: Interest earned on all U.S. Treasury securities, including treasury bills, is exempt from taxation at the state and local level but is fully taxable at the federal level. At the end of each year, owners of treasury bills should be sent a 1099-INT form

A corporate bond I own has just been called by the issuer. How can a company legally take away my bond? How do these call provisions work?

July 7, 2024 No Comments

A: Bond issues can contain what is referred to as a call provision, which is a right afforded to the issuing company enabling it to refund the bondholder the par value of his/her bond (perhaps including a small call premium) at the company’s discretion. Any

Are Bid Prices of T-Bills Higher Than the Ask?

July 7, 2024 No Comments

A: Typically, the ask price of a security should be higher than the bid price. This can be attributed to the expected behavior that an investor will not sell a security (asking price) for lower than the price they are willing to pay for it (bidding price). How Bid/Ask

Are Certificates of Deposit (CDs) a Type of Bond?

July 7, 2024 No Comments

A: There is a fair amount of overlap between certificates of deposit (CDs) and bonds — they are both fixed-income securities which you generally hold on to until maturity. Simply put, you put your money into a CD or bond for a set period, and you know exactly

Are high-yield bonds better investments than low-yield bonds?

July 7, 2024 No Comments

A: Most bonds typically make periodic payments, known as coupon payments, to the bondholder. A bond’s indenture, revealed when the purchaser buys the bond, will specify the the details of the coupon payments. Different companies will issue different bonds to raise financial capital, and the

Are money market accounts considered checking or savings?

July 7, 2024 No Comments

A: A: A money market account (MMA) is neither a checking account nor a savings account, though it does contain elements of both. Like a checking account, an MMA offers check-writing privileges, though they are limited to around three per month. Some MMAs also offer

Are U.S. banks authorized to issue bank guarantees or medium term notes (MTNs)?

July 7, 2024 No Comments

A: Bank guarantees and medium term notes (MTNs) are different types of instruments that serve different purposes for corporations. Bank guarantees are instruments issued by a bank or other lending institutions ensuring that the money owed by a debtor will be paid. In other words,

Calculate the total return of the municipal bond described below.

July 7, 2024 No Comments

A: Jane and Fabbio Salvatore have just discovered that a Fabulous Florence municipal bond will be offered to support a bridge development in Fabbio’s hometown in Florence, OH. They want to purchase the bond at $1,000, but end up buying the 10% bond at $1,020.

Why Do Companies Issue 100-Year Bonds?

June 30, 2024 No Comments

A: Although it is rare, companies and governments do issue bonds that exceed an average person’s life expectancy. For example, multi-billion dollar companies such as the Walt Disney Company (DIS) and Coca-Cola (KO) have issued 100-year bonds in the past. Many of these bonds and debentures

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