High-yield bonds are bonds that have relatively high interest rates in exchange for having greater risk attached. Basically, because high-yield bonds have less security, the organizations that offer them attach higher interest rates as an incentive to buy. High-yield bonds are often called “junk bonds.” Bonds are classified as “junk” when they have a risk rating of Ba, BB, or lower.
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High-Yield Bonds are…
Wednesday, August 5th, 2009Publicly Held is…
Wednesday, August 5th, 2009Publicly held is a description that refers to a company whose stock is owned by the public (as opposed to a privately held company, whose stock is not available for purchase by the public).
Preferred Stock is…
Wednesday, August 5th, 2009A Partnership is…
Wednesday, August 5th, 2009A partnership is a group of at least two people who agree to share the profits and risks involved in running a business.
The Federal Reserve is…
Wednesday, August 5th, 2009The Federal Reserve (or “the Fed”) is the government agency that sets monetary policy, which means they try to control inflation and affect people’s spending habits by changing interest rates. The Fed also controls the discount rate, which is an interest rate that makes it cheaper or more expensive for banks to borrow and lend money.
An Exchange is…
Wednesday, August 5th, 2009An exchange is any marketplace with established rules and regulations where you can buy and sell one or more types of commodities (stocks, bonds, options and futures, etc.).
Duration is…
Wednesday, August 5th, 2009Duration is a measurement of how sensitive the price of a bond is to changes in interest rate. A bond with a higher duration would change in price more than a bond with lower duration given the same change in interest rate. The higher the duration, the more you can either gain or lose on the market price of the bond – depending on whether the interest rate increases or decreases.
Accrual Basis is…
Wednesday, August 5th, 2009Accrual basis is an accounting method in which you factor in profits and expenses as they are incurred, rather than after the money has actually changed hands. For example, say you sell your friend a laptop, and he agrees to pay you $1,000 next week. If you’re keeping your accounts on an accrual basis, you write down the $1,000 as income now, even though you won’t actually get the money until next week.