What is a stripped bond?

July 8, 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 Is a Triple Tax-Free Municipal Bond?

July 8, 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 8, 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 debenture and a bond?

July 8, 2024 No Comments

A: Debentures and bonds are types of debt instruments that can be issued by a company. In some markets (India, for instance) the two terms are interchangeable, but in the U.S., they refer to two separate kinds of debt securities. The functional differences center around

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

July 8, 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

What is the difference between market risk premium and equity risk premium?

July 8, 2024 No Comments

A: The only meaningful difference between market-risk premium and equity-risk premium is scope. Both terms refer to the same concept and are calculated the same way. Yet the equity-risk premium only refers to stocks, while the market-risk premium refers to all financial instruments. Standard equity-risk

What are the main advantages of fixed income securities?

July 8, 2024 No Comments

A: Fixed income securities are commonly used to diversify an investor’s portfolio, as they reduce the overall risk of an asset allocation or investment strategy weighted heavily in the stock market. Fixed income securities such as corporate bonds, government bonds, preferred company stocks and certificates

What are the pros and cons of operating on a balanced-budget?

July 8, 2024 No Comments

A: Few issues are more complicated, contentious and controversial in contemporary American politics than balancing the federal government’s budget. Those who argue in favor of a balanced budget offer many claims about the deleterious impacts of huge federal debt. Others counter that balanced budgets would

Is variance good or bad for stock investors?

July 8, 2024 No Comments

Variance is neither good nor bad for investors in and of itself. However, high variance in a stock is associated with higher risk, along with a higher return. Low variance is associated with lower risk and a lower return. High variance stocks tend to be

Par Value vs Face Value

July 8, 2024 No Comments

A: When referring to the value of financial instruments, there’s no difference between par value and face value. Both terms refer to the stated value of the financial instrument at the time it is issued. Breaking It Down The par value of a bond can

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