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What are cash dividends?

A cash distribution of net income after taxes by a company to its shareholders is a cash dividend.  It is commonly expressed as a certain amount of money per share for common stock…


What are capital, pre-tax and after-tax returns?

Performance figures can cover a rolling period, whether annually, monthly, weekly or daily.  Rolling returns are a fund’s total returns reported in an overlapping series of rolling…


What are capital requirements?

Credit risk is the dominant source of risk for banks and leasing companies.  The amount of capital in relation to risk weighted assets required by regulatory authorities that finan…


What are bond funds?

Bond funds are investment funds that invest primarily in bonds or other types of debt securities and classified by their primary underlying assets: Government bond fund – A bond fu…


What are benchmark yield curves?

The US Treasury yield curve plots the rates that are interpolated by the US Treasury Department from the daily yield curve – constant maturity treasury (CMT) rates – calculated fro…


What are bank discount yield (BDY) and effective annual yield (EAY)?

Bank discount yield (BDY) is the annualized discount rate expected from the face value of a money market instrument on a 360-day simple interest basis (i.e., without compounding) e…


What are asset-backed securities (ABSs)?

An asset-backed security (ABS) is a marketable security that is issued by a special purpose vehicle (SPV) that buys financial receivables, such as automotive leases and consumer lo…


What are ADR programs?

An unsponsored ADR (UADR) is an American depositary receipt (ADR) that is issued by a US depositary bank in an unsponsored program without the contractual involvement of the issuer…


Mutual Funds and Exchange-Traded Funds

A mutual fund is an open-end investment company that continuously issues redeemable shares upon investor demand, typically through a registered broker-dealer for the fund.  They ar…


Mutual Funds and Exchange-Traded Funds

A mutual fund is an open-end investment company that continuously issues redeemable shares upon investor demand, typically through a registered broker-dealer for the fund.  They ar…


Investment Funds Images & Tables

The Key Parties in a Mutual Fund and Their Roles Board of Directors Fund Manager Principal Underwriter Fund Administrator Fund Transfer Agent Fund Custodian Oversees fund managemen…


Investment Funds

An investment fund is a financial vehicle used for the purpose of investing the pooled funds of numerous separate and unrelated investors in a portfolio of securities based on a sp…


How is yield in different markets measured?

The yield on a money market instrument depends on whether it is a discount instrument or add-on instrument.  Discount instruments, such as Euronotes and often Euro-CP, are issued a…


How is CP program paper sold?

Commercial paper programs are established for the issuance of CP in domestic markets and in foreign markets, in the form of Euro-CP (ECP).  The paper of commercial paper programs i…


How is bond yield measured?

Current yield is the amount of return on an investment based on the clean price of a bond determined by dividing its annual coupon (nominal yield) by its market price.  It simply s…


How is bond equivalent yield measured?

The semiannual yield to maturity is the yield to maturity on a semiannual-pay bond equal to the discounted rate per semiannual period times two.  As such, these yields are not effe…


How do stock splits effect share value?

If either an increase in the number of authorized shares and/or a change in par value are necessary, a split up or split down requires an amendment to the company’s articles of inc…


How do lessors classify leases under ASC 842 and IFRS 16?

Accounting standards require lessors to identify lease transactions that transfer to the lessee control over the leased asset and substantially all of the risks and rewards inciden…


How do lessors classify leases under ASC 840 and IAS 17?

Except for real estate leasing, leases are classified by the lessors on the basis of an assessment of the characteristics of the arrangement at the inception or modification of the…


How are US Treasuries issued?

US Treasury securities can be bought directly for accounts held with the US Treasury via TreasuryDirect.  TreasuryDirect is a web-based system established by the US Bureau of Publi…


How are stock dividends accounted for?

The usual accounting for a stock dividend is to decrease retained earnings and increase the paid-in capital accounts by a corresponding amount, the amount transferred depending on…


How are shares issued?

A public offering involves the sale of new securities and/or the resale of a block of previously issued shares to the general investing public with the objective of attracting inte…


How are leases classified by lessees under ASC 842 and IFRS 16?

Under both IFRS 16 and ASC 842 lessees are required to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets.  The new accountin…


How are leases classified by lessees under ASC 840 and IAS 17?

IAS 17 requires finance lease classification when the lease term is a “major part” of the asset’s economic life or the present value of the lease payments is equal to “substantiall…


How are investment funds taxed?

US mutual funds are not subject to US federal income tax at the fund level if they satisfy certain tax requirements and distribute all their income to shareholders.  Generally, the…


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