Despite the United States Federal Reserve Board’s diligent attempts to stimulate the economy throughout the year of 2008 by repeatedly reducing the Federal Funds rate, the typically correlating thirty-year average mortgage rate stubbornly remained unchanged through the first quarter of 2009 as if mortgage rates had intentionally ignored Board Chairman Ben Bernanke’s seemingly regular rate cut announcements. The unanticipated loss of the Fe (more…)

A bond is a financial asset in the form of a long-term contract under which the firm (borrower) agrees to make payments of interest and principal, on specific dates, to the holders of the bond.  

The value of a bond, as of any financial asset, is the present value of the cash flows that are expected to be generated by the bond. In order to be able to calculate the present value of a bond, we need first to investigate the contractual f (more…)

If you were offered a dollar today or ten dollars next week, which would you choose? What if you couldnt have that ten dollar bill until next month or next year? If you would rather have the cash now than wait, you are in the majority. This is why real estate notes are sold at a discounted rate from the actual value of the note.

Real estate investors use a special formula to determine how much money a note is worth at any g (more…)

Financial instruments found in the debt market include:

1. Term Deposits

2. Government bonds

3. Treasury Bills (T-Bills)

4. Money Market Funds

5. Corporate Bonds and Debentures

6. Domestic Bond Funds.

In this article, we will only discuss the term deposits, government bonds, treasury bills and money market fund.

1. Term DepositsTerm Deposits (more…)

If you invest in a bond and the interest rates begin to fall, this will actually cause the value of your bond to rise. If the interest rates rise on the other hand, this is going to cause the value of your bond to fall. This is because as the interest rates begin to change, any existing bonds with fixed interest payments or coupon rates, bonds that do not float with market interest rates and bonds with zero-coupon interest rates have to adjust (more…)