How Central Banks Influence Money Supply

June 30, 2024 No Comments

A: Central banks use several different methods to increase (or decrease) the amount of money in the banking system. These actions are referred to as monetary policy. While the Federal Reserve Board (the Fed) could print paper currency at its discretion in an effort to

How does TARP affect the economy?

June 30, 2024 No Comments

A: TARP – or the Troubled Asset Relief Program – is a government program created in response to the subprime mortgage crisis that began in 2007. The original goal of the program was to give the U.S. Treasury $700 billion in purchasing authority to buy

How do hurdle rate MARR and internal rate of return IRR relate?

June 30, 2024 No Comments

A: In capital budgeting, projects are often evaluated by comparing the internal rate of return (IRR) on a project to the hurdle rate, or minimum acceptable rate of return (MARR). Under this approach, if the IRR is equal to or greater than the hurdle rate, the

Do high interest rates hurt the performance of telecommunication stocks? If so, why?

June 30, 2024 No Comments

A: Conventional investing wisdom holds that certain types of equities have above-average sensitivity to rising interest rates, not unlike bonds. The common shares of utility companies, established oil companies and telecommunications companies (among others) become more bearish when talk of rate increases begins and investors

Do Preferred Shares Offer Companies a Tax Advantage?

June 30, 2024 No Comments

A: A preferred stock is a class of ownership in a corporation that provides a higher claim on its assets and earnings as compared to common stock. There is no direct tax advantage to the issuing of preferred shares when compared to other forms of financing such

How Are Bonds Rated?

June 30, 2024 No Comments

A: A bond rating is a grade given to a bond by various rating services that indicates its credit quality. It takes into consideration a bond issuer’s financial strength or its ability to pay a bond’s principal and interest in a timely fashion. Moody’s, Standard and

How Are Convertible and Reverse Convertible Bonds Different?

June 30, 2024 No Comments

A: Convertible bonds give bondholders the right to convert their bonds into another form of debt or equity at a later date, at a predetermined price and for a set number of shares. Meanwhile, reverse convertible bonds give the issuer the right, but not the obligation,

How Are Day-Count Conventions Used in Bond Markets?

June 30, 2024 No Comments

A: A day-count convention is a system used in the bond markets to determine the number of days between two coupon dates. This system is important to traders of various bonds because it affects how the accrued interest and present value of future coupons is

How are municipal bonds taxed?

June 30, 2024 No Comments

A: Municipal bonds are commonly tax-free at the federal level, but can be taxable at state or local income tax levels or under certain circumstances. An Overview of Municipal Bonds A municipal bond, also known as a muni, is a debt security used to fund

How Are Savings Bonds Taxed?

June 30, 2024 No Comments

A: According to Treasury Direct, interest from EE U.S. savings bonds is taxed at the federal level but not at the state or local levels for income. This interest is also taxed through federal and state estate, gift and excise taxes. The interest is the amount that a bond can

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