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What are Freddie Mac and Fannie Mae? They sound like snack cakes to us, so, uh...maybe we should watch this video.

What are Bond Anticipation Notes (BANS), Revenue Anticipation Notes (RANS), and Tax Anticipation Notes (TANS)? BANS, RANS and TANS are all short-te...

What is After Tax Yield? After tax yield is simply how much an investment makes (or yields) after taxes have been paid. This term refers to bond yi...

What are the differences in S&P’s and Moody’s ratings? Both S&P and Moody’s give ratings that help investors determine if they are making sma...

What are credit ratings and how are they interpreted? Credit ratings describe a borrower’s likelihood to pay back their debts; it’s a look at h...

What are bond ratings and what do they mean? Bond ratings are just credit ratings used on bonds. Just like a credit rating, they give the investor...

What is ordinary income versus long-term gain income? Hit play to find out.

What is the difference between taxable and untaxed returns? Not all returns and investments are taxed. Some of these can be considered nontaxable i...

What's the difference between senior and junior debt? No matter the differences, we know the similarity: you don't want to be in either of them.

When you realize a gain or loss, it means that you turn an investment into cash. Thrilling, we know.

What is a muni bond? Muni bonds are bonds issued by the government. They are used to raise the money required to pay for government responsibilitie...

What is amortization? Amortization tracks the decline in value of a contract or service, usually paid for in advance. You received $10,000 in advan...

Maturity is, quite simply, the date when a debt becomes due. As for our maturity, well... we're still giggling about the word "due."

What is an Agency Bond? Agencies bonds are issued by government agencies, not the treasury. The typical government bonds (T-bills, T-notes, and suc...

Term to maturity is kind of the life cycle of a bond, but luckily for the bond, it gets to skip puberty.

What is Yield to Maturity? When calculating bond yields, the yield to maturity is the interest rate that an investor would ultimately accumulate if...

What are the Major Classes of Bonds? Insofar as US dollar denominated bonds go, the primary classes of bonds are: 1) US Treasury Bonds; 2) US Treas...

What are Above Par and At Par? Above par is when bonds trade at higher prices than face value. At par is when bonds are trading at face value. It s...

What is Bond Amortization? Bond amortization is simply the spreading out of the cost of the bond over time. Bonds have amortization schedules and t...

What is a basis point? Basis points are how changes in financial securities are described. “The stock dropped 100 points” actually means that t...

Tax basis is your cost for assessing how much you owe in taxes, and is determined by multiplying your gains by your tax rate.

What is an LLC? LLC stands for Limited Liability Company. It is a hybrid type of company that combines the corporate protections of separating corporate and personal assets and liabilities with tax advantages and other elements of partnerships and sole proprietorships. The LLC’s tax liabilities are paid at the shareholder’s personal level, so the LLC only files returns without payments. Unlike the corporation, the LLC cannot outlive its founders unless there are continuation agreements. Additionally, new shareholders can be added without corporate resolution in the LLC.

What are Fixed Assets, Tangible Assets and Intangible Assets? Fixed assets are long term, illiquid assets that are necessary for a company’s operation. Accountants usually categorize Fixed Assets as Property, Plant and Equipment (PPE). Tangible Assets include fixed assets as well as other physical assets, such as inventory, vehicles, and other tactile assets. Intangible assets are those that exist as legally enforceable constructs, such as licenses, patents, goodwill, social media influence, branding, etc.

What is an Accumulated Dividend? Accumulated dividends are dividends paid on cumulative preferred stock. They are referred to as accumulated because they are a combination of previous and current dividends, none of which have been paid to the shareholder yet.

What is Dividend Yield? Similarly to how a bond’s price and coupon is calculated to determine yield, dividend paying stocks also have a yield ascribed to their dividends. This is calculated by the amount of the dividend divided by the share price. Just like with bonds, the lower the share price, or cost basis, the higher the yield, which is crucial for portfolio management accounting.

What is a Money Market Fund/Commercial Paper? Money Market Funds are mutual funds that are very safe and liquid. They invest in cash and securities with short-term maturities. Commercial paper is similar in that it has the short-term aspect. It is different because it’s issued by companies and used to take care of various financial obligations in the short term, or to buy inventory.

What is the Times Interest Coverage Ratio? The interest coverage ratio divides EBIT by interest expenses. It looks at a company’s ability to pay off its interest on debt given earnings. If the ratio is low, these numbers are too close together, which shows that the company struggles to cover interest. The “times” aspect comes in because the ratio shows how many times a company could pay their debts using what they’ve made.

With a reverse mortgage, payments go in the opposite direction of a normal mortgage, where you pledge your home as an asset, and receive $ each month.

What is Dividend Coverage/the Dividend Payout Ratio? The Dividend Cover ratio is the factor by which a company can overpay its dividend when its net income is broken down by the dividend rate. The Dividend Payout ratio, conversely, is the dividend divided by net income. It is also used to factor with earnings in order to calculate earnings per share.

What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of earnings. Dividends are viewed as a commitment, or marriage, not a hot weekend date.

What is the maturity of a bond? Maturity refers to the time when an investment ends. When maturity happens, the investor is either on the hook for the cash or is paid out, depending on the nature of the investment. In some cases they choose and are able to extend the investment, in which case a new maturity date would be established.

Why do companies buy back or repurchase their own stock? Companies buy back their own stock because it helps them to increase the value of stock and improve the “conditions,” we’ll say, for their current investors. After a buyback, there are less outstanding shares, so those shares are worth more and those investors own a larger part of the company.

What are high yield/junk bonds? Junk bonds are called junk for a reason. They are really risky, but because of this risk, they can pay very well. They also have low credit ratings. The reason they are so risky is because the companies that issue them are usually in some sort of financial distress, and it’s believed that they will struggle to repay them. So they promise high interest payments to obtain the income from bond purchases.

When you buy and sell something for investment purposes, whether it be a stock, artwork, gemstones, a bond, a condominium, you know that once you have sold the asset, you have a cost basis, a sale price, and a profit or loss. However, one asset may have made you a 50% profit and taken 15 years, whereas another might only have made 25% but took just two years. How do you quantify which was the investment that earned at a better rate for you? Does compounding enter into the equation? Did the investment asset cost you additional money over the period, such as maintenance, repair, insurance, etc.? These are all factors that are calculated to equate to an annualized return rate, which takes the total return and spreads it out over the period of time it was held, amd averages it out over a 12 month period.

What is Coupon Stripping? Coupon stripping is the process of taking a coupon bearing bond and separating the coupons into individual zero coupon securities of serial maturity to be sold in the market presumably for additional profit above the yield of the coupon annually on its own until maturity. This is akin to someone owning a large space and subdividing it into smaller rental units for a cumulative income greater than what a large rental space would yield.

How are interest rates determined? In short, the Federal Reserve plays the main role in determining interest rates. To do this, they use information from the economy and banks. When banks set their interest rates, they look at factors like the borrower’s ability to pay back the loan and inflation risk.

What is a zero coupon bond? Zero coupon bonds are an interesting investment because they don’t pay any interest. They are only desirable because they can be bought at huge discounts, so after the investor waits it out and cashes in at maturity, they usually make a decent profit.

What is Cost Basis? For accounting purposes, the cost basis is the amount invested at the time of asset purchase. That is subtracted from the sale price to determine the commensurate capital gain or capital loss generated by the investment’s impact on the overall portfolio.

What are Bonds? The simplest explanation is that a bond is essentially an I.O.U. that is issued by a corporate or government institution to borrow money. They will usually list a maturity date and terms for insurance payments in return for borrowing rights. As bonds have varying degrees of collateral behind their ability to repay, ratings agencies rank bonds accordingly with their commensurate level of default risk.

What is par value? The notional value of a stock or bond before an offering takes place. When a company is started, founders come up with a par value for their shares, usually fractions of a penny. With bonds, par value is normally $1,000, comprising one unit of a bond offering.