Taxable municipal bonds that feature tax credits and/or federal subsidies for bondholders and state and local government bond issuers. Build America Bonds (BABs) were introduced in 2009 as part of President Obama's American Recovery and Reinvestment Act to create jobs and stimulate the economy. BABs attempt to achieve this by lowering the cost of borrowing for state and local governments in financing new projects. Watch: Understanding Bonds |||In general, there are two distinct types of BABs: tax credit bonds and direct payment bonds. Tax credit bonds offer a 35% federal subsidy of the interest paid to bondholders, while direct payment bonds offer a similar subsidy in the form of a tax credit paid to the bondholder.
The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market. Also referred to as a "public offering". Watch: Initial Public Offering (IPO) Taobiz explains Initial Public Offering - IPO IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.
When the net asset value (NAV) of a money market fund falls below $1. Breaking the buck can happen when the money market fund's investment income does not cover operating expenses or investment losses. This normally occurs when interest rates drop to very low levels, or the fund has used leverage to create capital risk in otherwise risk-free instruments. |||The NAV of a money market fund normally stays constant at $1 because investment products usually do not produce capital gains or losses. As such, the principal in a money market fund usually remains constant, making risk exposure non-existent compared to stocks, bonds and non-money market mutual funds.The first case of a money market fund breaking the buck occurred in 1994, when Community Bankers U.S. Government Money Market Fund was liquidated at 94 cents because of large losses in derivatives.
1. The date at which a security is first made available for public purchase. The initial offering date is set during the underwriting process. For stocks, this marks the date of the initial public offering and the beginning of a quiet period, when insiders and underwriters cannot issue earnings forecasts or research reports on the company. This term also refers to the initial offering of shares in other assets, such as mutual funds and unit investment trusts (UITs). Taobiz explains Initial Offering Date Historically, stocks have been underpriced leading up to the initial offering date. This can create pent-up demand for shares on the first day of trading, and creates profit potential for those who can subscribe to the issue before the initial offering date. However, buying on the date of offering can be very risky. Because only a small percentage of the outstanding shares (typically less than 25%) are eligible to trade on the first day, share prices can become volatile and more difficult to anticipate. This same problem does not typically occur with shares of most other assets. Mutual fund or UIT shares are based on a portfolio of established securities with values that are already known in the market.
Bonds that are issued by the governments of developing countries. Brady bonds are some of the most liquid emerging market securities. They are named after former U.S. Treasury Secretary Nicholas Brady, who sponsored the effort to restructure emerging market debt instruments. |||The price movements of Brady bonds provides an accurate indication of market sentiment toward developing nations. Most issuers are Latin American countries.
A stock that an individual obtains through an inheritance after the original holder has died. The cost basis for the stock is based on the market value of the security upon the donor's death. If the stock value increased during the time it was held by the deceased, its cost basis is "stepped up" when ownership is transferred . Taobiz explains Inherited Stock Unlike gifted securities, for tax purposes, the security is not valued at its original cost basis. only the appreciation from the day of inheritance is subject to a capital gains tax.
1. A procedure used to calculate the zero-coupon yield curve from market figures. 2. A situation in which an entrepreneur starts a company with little capital. An individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company. |||1. Because the T-bills offered by the government are not available for every time period, the bootstrapping method is used to fill in the missing figures in order to derive the yield curve. The bootstrap method uses interpolation to determine the yields for Treasury zero-coupon securities with various maturities. 2. Compared to using venture capital, bootstrapping can be beneficial because the entrepreneur is able to maintain control over all decisions. On the downside, however, this form of financing may place unnecessary financial risk on the entrepreneur. Furthermore, bootstrapping may not provide enough investment for the company to become successful at a reasonable rate.
A debt or equity issuance in which the purchaser does not pay the full value of the issue up front. In the purchase of an installment receipt, an initial payment is made to the issuer at the time the issue closes; the remaining balance must be paid in installments, usually within a two-year period . Although the purchaser has not paid the full value of the issue, he or she is still entitled to full voting rights and dividends. Taobiz explains Installment Receipt This type of debt or equity financing is most attractive to issuers that are unable to get an attractive price for more traditional financing techniques, such as a traditional initial public offering (IPO). Installment receipts often trade on an exchange, in which case, whoever purchases them assumes liability for any installments that may remain. This type of financing is mainly seen in Canada.
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