What are Junk Bonds?
Junk bonds, which are also known as high-yield bonds, non-investment grade bonds and speculative bonds, are a type of bond that has a high risk of default attached to them. This means that the corporation or institution that is issuing the bond may be unable to pay back the money it has borrowed. These types of bonds are rated below investment grade and are riskier than investment grade bonds. Investment grade bonds are bonds issued by corporations or institutions, such as the US Treasury, that are highly likely to be able to pay out the bond in full. Junk bonds will usually pay higher interest rates to attract potential investors because of the risky nature of the investment. Junk bonds are usually purchased in the hopes that the corporation or institution will do well financially and deliver a huge payout to the investor when bonds are paid out. The companies that issue these types of bonds do not have the credit quality to achieve investment grade ratings.

Junk bonds are usually issued by two types of corporations or institutions, sometimes known as fallen angels or rising stars. Fallen angels are junk bonds that used to meet investment grade, but for some reason the corporation or institution has suffered a hit to its credit rating. A rising star is a junk bond that’s rating is increasing due to the corporation or institution improving its credit quality. This type of bond is considered to be on its way to becoming an investment grade bond.

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How to banks make money?
Banks are a business just like any other business. However, instead of selling a product such as food, cars or electrical items they “sell” money, loans, bank accounts and financial products. There are three main ways that banks make money. The first is through the interest that is charged on loans and credit cards. Banks loan money at a higher interest rate than that which they have to pay on the accounts of people who have deposited money into the bank. For example, the bank may pay 2.5% interest on deposited money in bank accounts then they would then have to charge a higher interest rate on loans to make a profit. This applies to all the loans available from a bank, including credit cards.

The second way that banks make money is to charge fees on various products that they offer consumers. Most bank accounts attract an accounting fee. Drawing money from an ATM or using the bank’s facilities may also attract a fee. Banks will also charge fees if you overdraw your account or if you want additional features, such as a checking account.

The third main way that banks make money is by investing a certain amount of money that is deposited by customers. In this way the bank can increase the initial amount of money, pay back the depositor with interest and keep the difference for themselves. Most banks have extensive share portfolios and other investments which continually make them money.

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Why do banks hold checks?
Checks were invented so that people did not have to carry large amounts of gold or silver. Basically a check is a document that directs for a payment to be made, to a individual or company, from the bank account of the individual/company who wrote the check. Once the check is deposited the bank must present it to the bank from which it was drawn (the bank of the individual/company that wrote the check). The issuing bank then pays the money into the account where the check was deposited.

The above process is mostly done electronically today, but banks still hold most checks while they are being processed. The most common reasons to hold a check today is so that the bank can ensure it is not a fraudulent check and that the bank account of the check writer has enough money to cover the transaction. Checks can also be held if an account has been subject to suspicious activity or if you are depositing a very large amount. The clearing period for a check may be delayed by weekends, public holidays and any other time the bank is closed for business. In most jurisdictions there are laws that state the maximum time that a check can be held, but it is still important to check the specific policy of your bank.

Did you know?
Banks process local checks faster than non- local checks. A non-local check is one that comes from a bank that operates outside the check-processing region of the local bank.

Even though many checks are held to ensure they are valid, there are still times when a check is later found to be a fraud or from an account with insufficient funds. In this situation the amount is taken from the account it was deposited into.

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What is a hedge fund?
A hedge fund is similar to most other investment funds because money is invested with the goal of increasing this investment. A hedge fund differs simply because of the type of investment strategy. Generally speaking a hedge fund is designed to make money regardless of the current economic situation and protect the investors from market downturns. However, the actual investment strategies can vary considerably between each hedge fund. It is not uncommon for people who invest in a more traditional investment fund to also have some money in a hedge fund as a kind of insurance against a market collapse.

Other types of hedge funds take on more risk and are designed to outperform other types of investments. These are managed much more aggressively than a traditional hedge fund and may include speculative investments. This type of hedge fund has become more common over the last decade and carries far greater risks to the investor. As with any financial decision, it is important to seek qualified financial advice before making any investment.

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What caused the Great Depression?

Historians and economists do not all agree on the cause of the Great depression. However, it is agreed that there was not a single cause and many factors led to this devastating economic downturn. The major cause of the Great Depression is seen as the stock market crash in America (now known as Black Tuesday). As stock prices fell people began to panic and sought to sell their stock, this dropped the price of stock lower and made them worth virtually nothing.

Banks who has invested large amounts of their patrons money in stock also lost money in the stock market crash and had no way to regain it. This forced some of the banks to close their doors because they didn’t have enough money. This sent people rushing to their bank to withdraw their money in case the remaining banks also closed. This massive withdrawal of money led to more banks closing and many people becoming bankrupt. This was due to the fact that once the bank was closed there was no way to retrieve their money they had invested. Banks that remained open were unsure of the economic stability and limited the amount of loans they gave. This meant that businesses and people had less money with which to make purchases.

The stock market crash and the closure of banks also had effects on the business and industry. Most lost money in the stock market and also through bank closure meaning that they had to cut employment hours and wages to save money. People could not afford to buy goods and this impacted on the businesses. A tariff was placed in imported goods meaning that businesses that relied on imported goods had no way to continue to run.

The virtual collapse of the stock market and economy in America then affected the rest of the world. Prices for commodities dropped drastically as countries had no money for international trade.

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Why is Insider Trading Illegal

Why Is Insider Trading Illegal?
Insider trading is illegal because it creates an unfair playing field. The investor market works on a concept of transparency. This means that all the information that is needed to make a sound financial decision is made public knowledge. People who are not part of the company are made aware of important factors at the same time. This gives everyone a fair chance to evaluate the information and decide whether or not to purchase shares in a corporation. Insider trading upsets this principle as “insiders” use knowledge that the general public is not privy too, to make decisions about their investments. If insider trading was legal it would undermine the confidence of investors and people may stop investing in the stock market. People would feel that the stock market was rigged to ensure that employees of large corporations benefit the most. There would then be no point in being a private investor as you would not get a fair deal. People not willing to invest would cause a huge downturn in the capital economy. It is also said to cause a n increase in the cost of capital for securities issuers, which directly effects economic growth.

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The introduction of Taxes
The first documented mention of taxes was in the first book of the Bible Genesis chapter 47, verse 25 when Joseph instructs the Hebrew people to give a fifth of their crops to pharaoh as a tax. This is supported by other documentations showing a taxation system in the Egyptian kingdom in 3000BC- 2800BC. Pharaoh would conduct an annual tour around the kingdom collecting the taxes from his people. Records of granary receipts have been found on papyrus and limestone.

The next taxation system to be documented was that of the Persian Empire in 500BC. The Persian Empire was divided into different Satrapy (sections) and each section was required to pay an annual tax according to what commodities it had. The area of Babylon for example would have to pay large amounts of silver and give four months supply of food for the empires army. In each satrapy there was a satrap (provisional governor) whose job it was to collect the required taxes and send it to the emperor. How the taxes were collected was left up to the discretion of the Satrap which of course led to a great deal of exploitation and bribery.

Taxes have continued to be the main way that governments generate revenue and are now based on a person’s income or business profit and any other taxes placed on goods and services.

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How Does 4o1k Work?

A 401k is basically a retirement plan allowing current workers to save for the future. A 401k plan is actually fairly simple to understand. An employee chooses to put away a certain amount of money each week. This is known as a ‘contribution’. Some employers will even match all or part of your payment as an incentive to put money in the 401k account. The money you put away will be invested by the 401k company. Most companies allow you to choose how the money is invested. When you retire, the account is close and all the funds go to you so you can enjoy your retirement. Employers can automatically enroll their employees in a 401k plan. However, an employee is allowed to opt-out if they so choose.

Two different 401k plans are available. Traditional 401k plans are the most common. The employee pays no income tax on the amount put into the 401k account. Tax is paid when the money is withdrawn from the account. Roth 401k accounts work differently. Income tax is either paid or withheld on all the money put into the 401k account. Therefore, when you retire and receive the money, you don’t have to pay any tax on it!

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When was the First Credit Card Issued?

From the 1930′s to the 1950′s, charge cards were popular in the United States. These cards were similar to credit cards as people would make purchases on the card and pay it off at a later date. However, the whole amount had to be paid. The first real credit cards, which did not have to be paid off all at once, were issued by the Bank of America in September 1958. It was launched as the BankAmericard in Fresno, California. This card eventually became the Visa system.

Interesting Facts About Credit Cards

• Actor Richard Hatch partly financed his production of Battlestar Galactica: The Second Coming using credit cards.
• Edward Bellamy described using credit cards to pay for purchases in his 1887 book ‘Looking Backward’. He used the phrase ‘credit card’ 11 times.
• Some fees charged by credit card companies include late fees, overlimit fees, transactions in foreign countries, membership fees (often called annual or monthly fees) and exchange rate fees.
• Prepaid credit cards are often used be teenagers to make purchases online.

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Tips to Get Out of Debt

Tips to Get Out of Debt

• Get another job and use most or all the money you earn to pay off your debt.
• Ask for lower interest rates. Don’t be afraid to call and tell them you are struggling to repay. Banks and financial institutions would rather get their money than have you declare bankruptcy.
• Cut up your credit cards. Only spend cash.
• Budget. Determine how much you really need to spend each week. Stick to the budget and don’t overspend.
• Stop buying things you don’t really need such as entertainment items (games, DVD’s and Blu-rays etc.)
• Look at other ways to save. What do you spend a lot of money on? You may have to give up a few luxuries for a while. Stop eating out for meals, drinking as much alcohol, going to the movies etc.
• Make extra repayments as much as possible.
• Use coupons to save money!
• Sell some old things you don’t need to earn a bit more money to pay off debt.
• Consider a debt consolidation loan. This rolls all secured debt into one loan with a lower interest rate. Be aware, however, that you will end up paying more over a longer period of time.
• Most importantly, don’t give up! It takes times to get out of debt and it won’t happen easily. Just keep going and stop using those credit cards!

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