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what is assignment in a deed of trust | in real estate law assignment is simply the transfer of a deed of trust from one party to another this usually happens when the beneficiary of a trust deed sells their loan to another lender | |
what is reconveyance in a deed of trust | in real estate law reconveyance means the transfer of a property from a lender or trustee to a borrower this usually happens at the end of a mortgage or other loan when the borrower has satisfied the terms of their debt who can be a trustee in a deed of trust some states have laws limiting who can act as a trustee in a deed of trust in these states the trustee must be a bank credit union thrift title insurance company attorney or other company specifically authorized to hold a trust in other states anyone can act as a trustee 3the bottom linetrust deeds are an alternative to mortgages in certain states instead of an agreement directly between a lender and a borrower a trust deed places the title of a property in the hands of a third party or trustee only after the borrower has satisfied the terms of their debt to the lender will the property be fully transferred to the borrower | |
what is a trust fund | a trust fund is an estate planning tool that holds property or assets for a person or an organization trust funds are sometimes simply referred to as trusts they can hold a variety of assets such as money real property stocks bonds a business or a combination of many types of properties or assets establishing a trust fund involves multiple parties the grantor the beneficiary or beneficiaries and the trustee trust funds can have more than one beneficiary they re managed by the trustee who has a fiduciary duty to act in the best interests of the grantor and beneficiaries trust funds can take many forms and they can be established with different stipulations they can be revocable or irrevocable some offer tax benefits and financial protections as well as support for those involved investopedia joules garcia | |
how trust funds work | estate planning is a process that involves determining how an individual s assets and other financial affairs will be managed and how any property they own will be distributed after they die property can include any bank accounts investments personal property real estate and or life insurance wills are the most common estate planning tool but trust funds are also popular legal entities laws governing trust funds can vary depending on the country of residency and creation the following parties are involved in establishing a trust 1the grantor generally creates an inheritance arrangement that s carried out after they re no longer mentally competent or alive as the appointed fiduciary the trustee is responsible for carrying out the interests and wishes of the grantor this can include allocating living expenses or even educational expenses such as private school or college expenses and or paying a lump sum or transferring property to the beneficiary or beneficiaries after death trust funds provide certain benefits and protections for those who create them and their beneficiaries revocable trust funds vs irrevocable trust fundsall trust funds are either revocable or irrevocable both are referred to as living trusts when the grantor creates them during their lifetime a testamentary trust is one that s created after the grantor s death usually under terms left in a last will it s irrevocable because the grantor is no longer living to make changes to it 4the grantor can change the terms of a revocable trust at any time or even dissolve and undo the trust completely if they choose assets funded or placed into a revocable trust can be transferred to any number of designated beneficiaries after the grantor s death or even during their lifetime 5the primary benefit of a revocable trust is that the assets avoid probate after the grantor s death this leads to the quick distribution of assets to the named beneficiaries the terms of a revocable trust aren t made public like those of a last will so an estate can be distributed with a high level of privacy grantors can act as their own trustees when they form a revocable trust or they can appoint someone else to the role they can name a successor trustee to take over management of the revocable trust after their death when the assets are typically distributed to beneficiaries and the revocable trust is dissolved an irrevocable trust fund is very difficult if not impossible to change or dissolve undoing it or its terms typically requires the unanimous consent of all beneficiaries this makes them virtually immune to estate taxes and creditor claims the grantor of a revocable trust can take back assets they ve placed into the trust at any time so they re still considered to personally own them this isn t the case with an irrevocable trust the grantor permanently gives up control and ownership of the assets and money placed into the trust although they set the terms as to the beneficiaries who will receive them and when 3types of trust fundsseveral types of trust funds are included under the umbrellas of revocable and irrevocable trusts they often have different rules and stipulations depending on the assets involved and the beneficiaries a tax or a trust attorney may be your best resource for understanding the intricacies of each of these vehicles this isn t an exhaustive list special considerationswealth and family arrangements can grow quite complicated when a great deal of money is at stake for multiple generations of a family or another entity a trust fund can include a surprisingly complex array of options and specifications as a result trust funds aren t just for the ultra rich contrary to what some people believe anyone can use them regardless of their financial situation discuss your needs with a financial or legal professional to find out what kind of fund is well suited for you | |
what is a trust fund baby | a trust fund baby is someone whose parents have set up a trust fund for them the term is a popular cultural reference that s often used negatively there s an implication that these beneficiaries are born with silver spoons in their mouths are overly privileged and don t have to work to earn a living trust funds can indeed provide beneficiaries with security but many so called trust fund babies don t live luxuriously or in high society | |
how do trust funds work | a trust fund is a legal entity that holds property and assets and can provide financial tax and legal protections a grantor sets it up and funds it with money or assets one or more beneficiaries receive the assets under specified terms the trustee manages the trust and distributes its assets at a prescribed time the trustee is in charge of managing the assets in an irrevocable trust while the grantor is still alive the trustee can pass the assets on to the beneficiary or beneficiaries per the grantor s instructions after the grantor s death under the trust terms that the grantor has set grantors often act as trustees of their revocable trusts they name successor trustees to take over management and dissolution of the trust when they die | |
how do i start a trust fund | you ll first have to figure out which type of trust is best suited for you then decide how you ll fund it figure out who you want to appoint as your trustee or successor trustee the final step is to fund the trust be sure a trust fund is the best choice for you your beneficiary and your financial situation seek legal help to set up the proper documents so you re sure the trust will serve the purpose you intend and its terms will be honored by the court the bottom linea trust fund is a living or testamentary trust that s set up to hold and manage assets on behalf of its beneficiaries it can be either revocable or irrevocable depending on the purposes you want it to serve and how much control you re willing to relinquish both types of trusts avoid probate but only irrevocable trusts can dodge estate taxes and avoid creditor claims trust funds can serve a multitude of purposes your best bet is to consult with a legal professional if you think one might be right for you a professional can guide you to what type of trust will most fully meet your needs they can ensure that the formation documents are created properly so they ll achieve your goals and hold up in court should anyone contest the trust s terms | |
what is a trust indenture | a trust indenture is an agreement in a bond contract made between a bond issuer and a trustee that represents the bondholder s interests by highlighting the rules and responsibilities that each party must adhere to it may also indicate where the income stream for the bond is derived from | |
how a trust indenture works | bonds are issued to lenders or investors to raise money for a corporation or governmental body to issue a bond the issuer hires a third party trustee usually a bank or trust company to represent investors who buy the bond the agreement entered into by the issuer and the trustee is referred to as the trust indenture a trust indenture is a legal and binding contract that is created to protect the interests of bondholders the trustee s name and contact information is included in the document which highlights the terms and conditions that the issuer lender and trustee must adhere to during the life of the bond the section on the trustee s role is important as it gives a clear indication of how unforeseen incidents will be dealt with for example if a conflict of interest comes up involving the trustee s role as a fiduciary in certain trust indentures the issue must be resolved within 90 days otherwise a new trustee will be hired a trust indenture also includes the characteristics of the bond such as maturity date face value coupon rate payment schedule and purpose of the bond issue one section of the trust indenture dictates the circumstances and processes surrounding a default the indenture establishes a collective action mechanism under which creditors or bondholders can collect in a fair orderly manner if default by the issuer takes place a bondholder should be aware of and understand the proper sequence of events allowing them to take the proper course of action should such a situation occur special provisions of a trust indentureprotective or restrictive covenants are highlighted in a trust indenture for example a trust indenture may indicate whether an issued bond is callable if the issuer can call the bond the indenture will include call protection for the bondholder which is the period during which the issuer cannot repurchase the bonds from the market after the call protection period the indenture may list the first call dates and any subsequent call dates that the issuer may exercise its right to call the call premium that is the price that will be paid if the issuer repurchases the bond is also indicated on the trust indenture almost all indentures include subordination clauses that limit the amount of additional debt that the issuer can incur and that dictate that all subsequent debts are subordinated to prior debts without such restrictions an issuer would theroretically be allowed to issue an unlimited amount of debt increasing bondholders exposure to default risk | |
which bonds have trust indentures | trust indentures may not be included in every bond contract given thatsome government bonds disclose similar information the duties andrights of the issuer and bondholders in a document called the bond resolution many of the current rules regarding trust indentures were established by the trust indenture act tia a piece of legislation passed in 1939 to protect bondholders and investors however most corporate offerings must include a trust indenture a copy of it must be filed with the securities and exchange commission sec for corporate bonds with aggregate principal issues of at least 5 million corporate issues for less than 5 million municipal bonds and bonds issued by the government are not required to file trust indentures with the sec of course these exempted entities may choose to create a trust indenture to reassure prospective bond buyers if not to adhere to any federal law | |
what were trust preferred securities trups | trust preferred securities trups were hybrid securities issued by large banks and bank holding companies bhcs included in regulatory tier 1 capital and whose dividend payments were tax deductible for the issuer the bank would open a trust funded with debt then the bank would carve up shares of the trust and sold them to investors in the form of preferred stock the resulting stock was called a trust preferred security or trups first issued in 1996 trups became the subject of increased regulatory scrutiny following the 2008 09 financial crisis as a result of the dodd frank reforms and the volcker rule most of these were phased out at year end 2015 1understanding trust preferred securities trups the trust preferred security has characteristics of both stock and debt while the trust is funded with debt the shares issued are considered to be preferred stock and even pay dividends like preferred stock however since the trust holds the bank s debt as the funding vehicle the payments the investors receive are actually interest payments and are taxed as such by the irs the trust preferred security usually offers a higher periodic payment than a share of preferred stock and can have a maturity of up to 30 years due to the long maturity timeline of the debt used to fund the trust the payments to stockholders can be on a fixed schedule or variable in addition some of the provisions in trust preferred securities can allow for the deferral of interest payments for up to five years the trups matures at face value at the end of the term but there is the potential for early redemption if the issuer so chooses trust preferred securities have been created by companies for their favorable accounting treatments and flexibility specifically these securities are taxed like debt obligations by the internal revenue service while maintaining the appearance of equities in a company s accounting statements according to gaap procedures the issuing bank pays tax deductible interest payments into the trust which is then distributed to the trust s shareholders it is an important distinction that when buying a trust preferred security the investor is buying a portion of the trust and its underlying holdings not a piece of ownership in the bank itself special considerationsthe dodd frank financial reform act passed in 2010 included a section that called for the phase out of tier 1 capital treatment of trust preferred securities issued by institutions with over 15 billion in assets by 2013 tier 1 capital treatment means that banks can use the money invested in their trust preferred securities to count towards their tier 1 capital ratio which is the money banks keep on hand to cover losses sustained due to bad debt phasing out or excluding trust preferred securities in the tier 1 capital ratio increases funding requirements for banks and in some cases reducing the number of incentives for banks to issue trust preferred securities the so called collins amendment was proposed in the u s senate to eliminate trust preferred securities as tier 1 regulatory capital altogether finally the costs are among the disadvantages for companies issuing trust preferred securities because the trusts sometimes have features like deferral of interest payments and early redemption of shares these nuances make them less attractive to investors and therefore the rates on trust preferred securities are typically higher than those offered on other types of debt simply investors demand a greater rate of return the costs of investment banking fees for underwriting the securities can be hefty as well | |
what is trust property | trust property refers to assets that have been placed into a fiduciary relationship between a trustor and trustee for a designated beneficiary trust property may include any type of asset including cash securities real estate or life insurance policies trust property is also referred to as trust assets or trust corpus understanding trust propertytrust property is typically tied into an estate planning strategy used to facilitate the transfer of assets upon death and to reduce tax liability some trusts can also protect assets in the event of a bankruptcy or lawsuit the trustee is required to manage the trust property in accordance with the trustor s wishes and in the beneficiary s best interests a trustee can be an individual or a financial institution such as a bank a trustor sometimes called a settlor or grantor can also serve as a trustee managing assets for the benefit of another individual such as a son or daughter regardless of the role a trustee plays the individual or organization must abide by specific rules and laws that govern the functioning of whichever type of trust is established once property has been transferred to a trust the trust itself becomes the rightful owner of the assets in an irrevocable trust the assets can no longer be controlled or claimed by the previous owner types of truststhere are several different types of trusts individuals can establish but they typically fall under two categories which are revocable trusts and irrevocable trusts in a revocable arrangement the trustor maintains legal ownership and control of trust assets for this reason the trustor would be responsible for paying taxes on the income those assets generate and the trust may also be subject to estate taxes should its value breach the tax exempt threshold at the time of the grantor s death with an irrevocable trust the trustor passes legal ownership of the trust assets to a trustee however this means those assets leave a person s property effectively lowering the taxable portion of an individual s estate the trustor also relinquishes certain rights to mend the trust agreement for example a trustor usually can t change beneficiaries of an irrevocable trust after they have been established this is not the case with a revocable trust a trustor may be referred to as grantor or donor in certain situations trusts can be created during an individual s lifetime or they can be established following the grantor s death this situation applies to payable on death pod trusts which transfer assets to a beneficiary following the death of the trustor generally speaking this type of trust and similar ones are called testamentary trusts because property is actually transferred following the trustor s death assets in these trusts flow directly to the intended beneficiaries following the trustor s death which means they avoid the often long and expensive process of probate probate is the legal process of validating and distributing assets outlined in a will these trusts can also be outlined in a person s will assets within living trusts can be transferred during the trustor s lifetime for example several individuals open accounts in trust with banks for the benefit of their children or to help fund their college expenses a trustee carefully manages the assets held in the account to achieve this goal but the children don t have complete access to the funds or the freedom to spend income from the fund as they please an example of this type of arrangement is a unified gift to minors act ugma account in some cases beneficiaries such as children would have access to the trust s assets and the income they generate only after reaching a certain age | |
what is a trust receipt | a trust receipt is a notice of the release of merchandise to a buyer from a bank with the bank retaining the ownership title of the released assets in an arrangement involving a trust receipt the bank remains the owner of the merchandise but the buyer is allowed to hold the merchandise in trust for the bank for manufacturing or sales purposes | |
how trust receipts work | a trust receipt is a financial document attended to by a bank and a business that has received delivery of goods but cannot pay for the purchase until after the inventory is sold in most cases the company s cash flow and working capital may be tied up in other projects and business operations in the normal course of running a trade business companies purchase goods for their inventories from vendors or wholesalers to resell to consumers or to manufacture goods these goods may either be purchased locally or imported from other companies when these companies receive the merchandise they are also billed by the seller or exporter for the goods purchased in the event that the firm does not have the required cash on hand to settle the bill it may obtain financing from a bank via a trust receipt the trust receipt serves as a promissory note to the bank that the loan amount will be repaid upon sale of the goods the bank pays the exporter on its end or issues the seller or seller s bank a letter of credit guaranteeing payment for the merchandise the lender however retains the title to the merchandise as security the customer or borrower is required to keep the goods separate from its other inventory and in effect holds and sells the goods as a trustee for the bank although the bank has a security interest in the goods under the standard terms of a trust receipt the customer takes possession of the goods and may do what they want with them as long as they do not violate the terms of their contract with the bank if the customer decides to terminate the bank s security interest and tie it to the inventory they may tender the amount advanced on the goods gaining total ownership of the goods example of a trust receiptunder a typical trust receipt transaction the business has little to none of its own assets invested in the particular goods financed the bank bears the majority of the credit risk prevalent in the transaction the business keeps any profits made from the resale of the goods but also bears the business risk if the goods get damaged lost or deteriorate in quality or value the loss is solely the burden of the business and it remains liable for repaying the full loan amount to the bank in addition any business expense such as manufacturing costs freight custom dues storage etc is the responsibility of the business not the lending institution special considerationsextending short term financing through a trust receipt requires the customer or borrower to be in good standing with the bank the bank and the customer also have to agree to the terms of the trust receipt including such conditions as the maturity date interest charge and financing amount maturity dates under trust receipts are short term and range from 30 to 180 days at the time of maturity the customer must repay the loan to the lender with interest stipulated under the terms of the trust receipt the bank must be repaid at the time of maturity or after the sale of the goods whichever comes earlier if after the maturity date no payment has been received by the bank or the business defaults in paying its advances the bank could repossess and dispose of the merchandise | |
what is the difference between a letter of credit and a trust receipt | commonly used in the trade industry a letter of credit is issued from a bank that guarantees the payment will be fulfilled and paid to the seller by the buyer by contrast a trust receipt is when the bank lends merchandise or goods to a business but retains ownership of the goods when the goods have been sold and payment is made to the bank the business then becomes owner of the goods | |
what happens if a trust receipt is violated | a trust receipt becomes violated when the borrower fails to return the goods that were lent to them or if they fail to return the sale of proceeds for the goods as stipulated under the terms of the agreement | |
what is a trustee | a trustee is a person or firm that holds and administers property or assets for the benefit of a third party a trustee may be appointed for various purposes such as in the case of bankruptcy certain types of retirement plans or pensions or to manage assets for someone like a minor trustees have a fiduciary responsibility to the trust s beneficiary or beneficiaries this means a trustee must act in the best interests of the beneficiaries to manage their assets | |
how a trustee works | a trustee is any person or organization that holds the legal title of an asset or group of assets for another person called the grantor a trustee is granted this legal title through a trust in which the they hold title to the assets held in trust for the benefit of others the people or entities who benefit from the trust are called beneficiaries a trust is a legal entity in which a person or party who owns assets also called a trustor gives another party the trustee title to those assets or property for the benefit of a third party for example a trust might be created to provide legal protection for the trustor s assets and ensure they are appropriately distributed the trustee is charged with ensuring that the trustor s wishes are fulfilled a trustee is thus responsible for properly managing all property and other assets placed in the trust for the beneficiaries a trustee s specific duties are unique to the trust agreement and are dictated by the type of assets held in the trust for instance if a trust holds various rental properties intended to be used for income it will be the trustee s duty to ensure those those properties are managed maintained occupied and generating income trustees are also required to financially manage and oversee accounts within a trust when it is made up of other investments such as equities in a brokerage account trustees have a fiduciary duty to the trust s beneficiaries which means they are required to put aside personal interests beliefs and biases to do what s best for the trust responsibilities of a trusteeall trustees have general guidelines and responsibilities regardless of the specifics in the trust agreement trustees generally assume the following duties types of trusteesif you are selecting a trustee you can choose someone you know it might be best however to find someone with experience a trustee should understand the trust being set up and know what their responsibilities are for example if the trust includes growing assets for your family s future generations you d want to appoint someone who understands how to grow wealth there are generally three types of trustees trustee vs executora trustee administers and manages a trust fund an executor manages and administers the estate of someone who has died and left assets to heirs through a will an individual can name one person for each role or could appoint one to perform both roles like a trustee an executor can be a trust company a bank or a trusted friend or family member the executor must distribute assets in accordance with the will left by the deceased trustees and executors must both follow the laws in their state when performing their duties who to choose as a trusteechoosing a trustee might be one of the most challenging tasks when creating a trust it s tough to know which person or entity you can trust to administer your assets the way you want them to here are some considerations for choosing a trustee a wealth management and trust company has finance professionals attorneys and accountants and will administer a trust to the letter your trust can be set up to pay any fees they may charge but you ll be able to rest knowing your assets are in the hands of someone who will act in the trust s best interests you can choose a trusted friend or family member but you ll need to ensure they are up to the task of administering your trust additionally they ll need an iron will to withstand the drama and resentment that can arise when a family member is in charge of large sums of money and won t give any out on demand this person must also be willing and able to continue the task as long as the trust exists lastly you ll need to consider and appoint an alternate in case something happens to the primary trustee this ensures your trust is administered by someone you choose rather than having the courts choose for you a trust attorney can also be an excellent choice they ll be familiar with trust laws in your state and be a reliable trustee however if one of your intentions as the grantor is to grow wealth within the trust a lawyer may not be an investment professional or understand how to manage wealth | |
what is the role of a trustee | a trustee administers a trust based on the instructions left by the grantor this can include communicating with beneficiaries allocating funds to investments distributing payments according to instructions and much more | |
what does it mean if someone is a trustee | a trustee has been given the responsibility of ensuring a grantor s assets are used the way they intended them to be a trustee has a fiduciary duty meaning they must act in the best interests of the beneficiaries rather than according to their personal interests or wishes | |
what are the three duties of a trustee | a trustee must administer the trust per the grantor s instructions be loyal to the beneficiaries and deal with beneficiaries impartially the bottom linea trustee is someone who has been granted a fiduciary responsibility to care for the assets placed in a trust there are many reasons for placing assets into a trust from ensuring you have income in your later years to growing wealth for your family and having it distributed as income after you pass all states have laws governing trusts and how they must be administered so when choosing a trustee it s essential for the person you choose to understand trusts and be up to the task if you don t know someone capable of being a trustee you can find wealth management companies banks trust companies and attorneys specializing in administering trusts | |
what is the truth in lending act tila | the truth in lending act tila is a federal law enacted in 1968 to help protect consumers in their dealings with lenders and creditors the tila has been implemented by the federal reserve board through a series of regulations some of the most important aspects of the tila concern the information that must be disclosed to a borrower before extending credit such as the annual percentage rate apr the term of the loan and the total costs to the borrower this information must be conspicuous on documents presented to the borrower before signing and in some cases on the borrower s periodic billing statements | |
how the truth in lending act tila works | as its name clearly states the tila is all about truth in lending it was implemented by the federal reserve board s regulation z 12 cfr part 226 and has been amended and expanded many times in the decades since the provisions of the act apply to most types of consumer credit including closed end credit such as car loans and home mortgages and open end credit such as a credit card or home equity line of credit the rules are designed to make it easier for consumers to comparison shop when they want to borrow money or take out a credit card and safeguard them from misleading or unfair practices on the part of lenders some states have their own variations of a tila but the chief feature remains the proper disclosure of key information to protect the consumer as well as the lender in credit transactions the truth in lending act tila gives borrowers the right to back out of certain kinds of loans within a three day window 1examples of the tila s provisionsthe tila mandates the kind of information lenders must disclose regarding their loans or other services for example when would be borrowers request an application for an adjustable rate mortgage arm they must be provided with information on how their loan payments could rise in the future under different interest rate scenarios the act also outlaws numerous practices for example loan officers and mortgage brokers are prohibited from steering consumers into a loan that will mean more compensation for them unless the loan is actually in the consumer s best interests credit card issuers are prohibited from charging unreasonable penalty fees when consumers are late with their payments additionally the tila provides borrowers with a right of rescission for certain types of loans that gives them a three day cooling off period during which they can reconsider their decision and call off the loan without losing money the right of rescission protects not just borrowers who may simply have changed their minds but also those who were subjected to high pressure sales tactics by the lender 2in most instances the tila does not govern the interest rates a lender may charge nor does it tell lenders to whom they can or can t extend credit as long as they are not violating the laws against discrimination the dodd frank wall street reform and consumer protection act of 2010 transferred the rule making authority under the tila from the federal reserve board to the newly created consumer financial protection bureau cfpb as of july 2011 3for civil tila violations the statute of limitations is one year whereas for criminal violations is three years 4regulation z and mortgagesfor closed end consumer loans regulation z prohibits creditors from issuing compensation to loan originators or mortgagees when such compensation is based on any term other than the credit amount therefore creditors cannot base compensation on whether a term or a condition is present increased decreased or eliminated regulation z also prohibits loan originators and mortgagees from steering a customer to a certain loan when that loan offers greater compensation to the originator or mortgagee but offers no additional benefit to the customer for example if a mortgage broker suggests that a customer choose an inferior loan because it offers better compensation it is considered steering and is prohibited in instances when the consumer compensates the loan originator directly no other party who knows or should know about that compensation may compensate the loan originator for the same transaction the regulation also requires creditors who compensate loan originators to keep records for at least two years regulation z provides a safe harbor when the loan originator acting in good faith provides loan options for each type of loan the consumer is interested in the options however must satisfy certain criteria the options presented must include a loan with the lowest interest rate a loan with the lowest origination fees and a loan with the lowest rate for loans with certain provisions such as loans with no negative amortization or prepayment penalties in addition the loan originator must procure offers from lenders with whom they regularly work 5benefits of the truth in lending actthe truth in lending act tila helps consumers shop for and make educated decisions about credit such as auto loans mortgages and credit cards tila requires that issuers of credit provide the costs of borrowing in a clear and obvious manner without this requirement some lenders may hide or not disclose terms and rates or they may present them in a way that is difficult to understand before tila some lenders would engage in deceitful and predatory tactics to lure customers into one sided agreements after the truth in lending act was established lenders were prohibited from making certain changes to the terms and conditions of a credit agreement once executed and from preying on vulnerable populations tila also grants consumers the right to rescind a contract subject to tila s rules within three days if the terms of the agreement are not satisfactory or in the consumer s best interest they may cancel and receive a full refund | |
what does the truth in lending act do | the truth in lending act tila helps protect consumers from unfair credit practices by requiring creditors and lenders to pre disclose to borrowers certain terms limitations and provisions such as the apr duration of the loan and the total costs of a credit agreement or loan who does the truth in lending act apply to the truth in lending act applies to most types of consumer credit such as auto loans mortgages and credit cards it does not however apply to all credit transactions for example tila does not apply to credit issued to businesses including agricultural businesses entities public utilities home fuel budget plans and certain student loan programs 6 | |
what is a real life example of the truth in lending act | a real life example of the truth in lending act includes credit card offers from banks such as chase chase offers borrowers the opportunity to apply for the airline united gateway credit card on its website presented are the pricing and terms apr 16 49 23 49 based on creditworthiness and an annual fee 0 required by tila the card s pricing and terms disclosure detail the apr for different types of transactions such as balance transfers and cash advances it also lists fees of interest to consumers 7 | |
what is a truth in lending agreement | a truth in lending agreement is a written disclosure or set of disclosures provided to the borrower before credit or a loan is issued it outlines the terms and conditions of the credit the annual percentage rate apr and financing details | |
what is a tila volation | some examples of tila violations include a creditor failing to accurately disclose the apr and finance charge the misapplication of the daily interest factor and the application of penalty fees exceeding tila limits a creditor is also in violation if they do not allow the borrower to rescind the contract within the prescribed limit 8the bottom linethe truth in lending act tila was signed into law in 1968 as a means to protect consumers from unfair and predatory lending practices it requires lenders and creditors to supply borrowers with clear and visible key information about the credit extended tila prohibits creditors and loan originators from acting in a self seeking manner especially when to the detriment of the client to protect consumers against unfair lending practices consumers are granted the opportunity to rescind their agreement within a specific time for certain loan transactions the truth in lending act not only serves to protect consumers but also lenders and creditors who act in good faith | |
what is tsa precheck | tsa precheck is a u s government program that allows travelers deemed low risk to pass through an expedited security screening process at more than 200 u s airports tsa precheck benefits for air travelers include faster access to airline boarding gates and an absence of the usual requirements to scan your laptop and jacket you can even keep your shoes on through security about 99 of tsa precheck passengers waited less than 10 minutes to pass through security as of 2024 there are more than 18 million active members in the precheck program the application process includes applying through the tsa website and attending a brief in person meeting 12 | |
how tsa precheck works | tsa precheck travelers often have dedicated lines at the security checkpoint they don t have to remove belts shoes or lightweight jackets for separate screening their carry on items are not separately screened either they can leave a laptop in its case and the carry on bag can include a quart sized bag with travel size containers of liquids and gels the tsa precheck program began in december 2013 to speed pre screened travelers through security checkpoints which get backed up during busy times 3 the usual process includes a requirement that passengers remove their shoes heavy jackets and some electronics and pile them into trays for separate screening further delays can be caused by passengers being pulled aside for additional scrutiny if the screening reveals banned items these measures aren t pointless a would be terrorist smuggled explosives in his sneakers on a paris to miami flight in 2001 4 dangerous or illegal items can be hidden inside laptops that have had their components removed bulky jackets can hide weapons the tsa precheck program identifies passengers who are at very low risk of trying any of these strategies and speeds them through the security checkpoints benefits of tsa precheckthe tsa precheck program benefits anyone who travels frequently for business or leisure reasons anyone forced to fly at peak times like holiday weekends will appreciate the break as well tsa precheck benefits include in short you ll spend less time standing in line and more time lounging in the airport cafe applying for tsa precheckmore than 200 airports and 90 airlines accommodate tsa precheck travelers you can begin the application process online via the tsa s website 5however you have to complete the application process in person at a tsa authorized enrollment location you will be fingerprinted and asked for a valid proof of identity and u s citizenship documents travelers who are foreign citizens must be able to provide certain residency documents to qualify the online application takes less than five minutes on average and the in person appointment takes about 10 minutes 2once approved for tsa precheck status you will receive a known traveler number ktn use that number any time you book a flight and you will automatically have your tsa pre status applied to your boarding pass it looks like this tsa pre then you can start using those fast lanes reserved for tsa precheck passengers the cost of becoming a traveler with tsa precheck status the fee is non refundable and good for five years 6precheck coverage with credit cardssome credit card issuers provide access to tsa precheck as a membership benefit some offer periodic statement credits for tsa precheck while others allow their members to pay for the program with loyalty points according to the tsa these cards include 7other traveler programstsa precheck only applies to air travel the department of homeland security operates other federal programs such as global entry nexus and sentri that verify the identities of trusted travelers and speed them through security for u s citizens membership in these programs may include a tsa precheck membership there are also private programs that can speed up your trip one of them is clear a security technology program that uses biometric data to help identify passengers clear is already used in more than 55 airports as well as other locations such as stadiums tsa precheck vs global entry vs cleartsa precheck allows pre screened u s citizens and permanent residents to skip the lines at u s airport security it costs 78 for a five year membership 6however tsa precheck is only available for flights leaving the u s global entry is a similar program for international travel allowing trusted passengers to quickly move through customs and border checkpoints it costs 100 for five years 6clear is a private program available through some airlines clear uses biometric data such as fingerprints and iris scans to verify passenger identities allowing them to move quickly through airport security it s in use at some stadiums too clear costs 189 and only lasts for one year 8 | |
what are the requirements for tsa precheck | the tsa precheck application program is only open to u s citizens u s nationals and lawful permanent residents applicants may be ineligible due to incomplete or false application information violations of transportation security regulations or disqualifying criminal offenses 9applicants must fill out an online application and schedule an in person interview at a regional tsa approved office for screening a non refundable processing fee is required | |
what are the tsa precheck benefits | tsa precheck benefits for travelers include fast passage through security at airports and fewer annoyances precheck travelers do not have to pile their laptops shoes or overcoats in bins for separate screening the usual restrictions on liquids and gels apply but these can stay in the traveler s carry on | |
how can i apply for tsa precheck | first submit a short online application via the tsa s precheck website then schedule an in person interview at an enrollment center enrollment centers are located by zip code or address search can my children join me on the precheck line yes children 12 and under can join a parent or legal guardian with tsa precheck in the dedicated lanes if they re traveling together even if they do not have their own known traveler number 9 | |
is tsa precheck a security vulnerability | critics have argued that the vetting process is flawed and that those with bad intent can falsify statements made during in person interviews still there have been no known security incidents related to precheck since its inception in 2013 10the bottom linesince 2013 the tsa precheck program has allowed pre screened enrollees to speed through airport security via dedicated lanes with less stringent screening criteria the program is available to all u s citizens and legal residents who do not have a criminal history to enroll there is an online application and an in person interview the application costs 78 and enrollment lasts five years after which time it can be renewed for additional five year periods | |
how to affect a turnaround | turnarounds are important because they mark an upward shift or improvement for an entity after it experiences a significant period of negativity the turnaround is akin to a restructuring process where the entity converts the period of loss into one of profitability and success while stabilizing its future in investing the term can mean the amount of elapsed time between the placing and fulfilling of an order turnarounds may happen on many levels from the individual to a country s economy or even be a global event the term indicates a phase when an entity begins to experience steady and positive financial or performance recovery after a time of decline in most cases the first step in moving into a turnaround phase is to acknowledge the problems creating a downturn in the case of a business they may examine changes in management or problem identification and solving strategies in dire situations the best action may be to liquidate the company special considerationsthere are specific features that will usually identify an entity in need of a turnaround for a business these may include declines in the price of its stock the need to layoff employees and revenues that do not cover requirements to pay creditors changes in a firm s competitive advantage and outdated products or service may also be indicative of a business that needs to investigate turnaround strategies also bad management of resources such as labor and capital may put pressure on the company a stock speculator may profit from a turnaround if they accurately anticipate the improvement of a poorly performing company seldom do turnarounds happen in isolation but instead are the result of internal and external forces internally more attention may be paid to the problems in processes spending management and other factors that created a situation of decline externally the business may find new regulations that have provided them with a lower cost of production materials that can lead to higher profits a turnaround management team will review the primary causes of the company s failure and devise a strategic plan that may include restructuring or repositioning the business example of a turnaroundthe u s economy experienced a recession in 2009 after the subprime mortgage crisis led to the collapse of the u s housing bubble the crisis led to the collapse of some of the country s and the world s biggest banks the economy began experiencing a turnaround about a year later after the federal government responded with a series of bailouts and a stimulus package declining sales leading up to the financial crisis followed by a tightened lending environment for auto sales were two factors that significantly slowed revenue and earnings for u s automakers in the late 2000s the auto industry suffered troubled times in 2009 general motors gm declared bankruptcy as a result of the crisis and its stock was delisted from trading 1 bailout funds and its bankruptcy helped the company restore its manufacturing production and sales in 2010 after a complete reorganization gm s stock began trading again with increased production and sales 2 | |
what is a turnkey asset management program tamp | a turnkey asset management program offers a fee account technology platform that financial advisers broker dealers insurance companies banks law firms and cpa firms can use to oversee their clients investment accounts turnkey asset management programs are designed to help financial professionals save time and allow them to focus on providing clients with service in their areas of expertise which may not include asset management tasks like investment research and portfolio allocation in other words tamps let financial professionals and firms delegate asset management and research responsibilities to another party that specializes in those areas understanding turnkey asset management programs tamps delegating the role of asset manager to a tamp can help financial professionals and firms to increase profitability by freeing up more time for tasks like attracting new clients and meeting with clients in person these programs can also save their clients money because developing a proprietary asset management system can be expensive especially if the company does not already have one in place tamps also handle account administration billing and reporting using tamps also helps wealth advisers limit their risk of being sued for poor investment performance by outsourcing investment selection and management firms can transfer part of that risk to the tamp major turnkey asset management program providers include envestnet sei assetmark investment services brinker capital and orion portfolio solutions types of turnkey asset management programs tamps mutual fund wraps exchange traded fund wraps separately managed accounts unified managed accounts and unified managed households are five types of turnkey asset management programs a mutual fund wrap account is a tamp that offers many mutual funds with the fees encompassing wrapping around all of the investor s mutual fund trading rather than having to pay individual fees for each mutual fund thereby reducing overall fees exchange traded fund etf wrap accounts work in the same manner as mutual fund wrap accounts but investment choices are limited only to etfs as opposed to mutual funds separately managed accounts sma are geared to high level investors those with a significant amount of capital available for investing smas operate similarly to mutual funds except where a mutual fund is owned by pooled investors a separately managed account is owned only by one investor unified managed accounts hold a variety of different investments that are allocated to their own bucket one bucket would have stocks for example while another bucket would have bonds and another would have derivatives umas aggregate the entirety of an investor s assets but allow them to be managed separately as the name implies a umh is designed to handle the investments of multiple individuals of one household this would include parents and children and possibly grandparents if they are in the same household special considerationstamps are available in both off the shelf and customized varieties they are often privately labeled meaning that it is not apparent to clients that a third party is handling their investments in addition these programs serve all types of investors from mass market lower net worth clients to ultra high net worth individuals tamps provide base technology and additional back office support such as setting up automated alerts asset tracking and reporting and other dashboard features the service might also include supplying proposals wealth management tools compliance services investment policy statements and might also conduct a risk analysis tamps typically charge between 0 45 and 2 5 for their services 1these benefits can greatly improve an investment advisory firm but they come with costs and managers need to determine whether that additional cost is worth what they get in return which includes time saved to be able to generate more business advantages and disadvantages of tampstamps provide a significant advantage to advisors as they allow for the outsourcing of a variety of functions such as reporting that frees up a significant amount of time for an advisor that they can use to gain more clients or spend more time focusing on their client s investments which benefits the client in the end tamps can also be cost effective by outsourcing functions to a tamp an advisor will avoid the cost of having to set up such functions in house which can include hiring more employees providing more benefits and so on in the end this could reduce their overhead savings that they can technically pass onto their clients as an investor it s important to understand your fee structure if your advisor uses a tamp check to see if the fees they pay are passed onto you or not if so that could be a disadvantage making your investments more costly | |
when an advisor uses a tamp the advisor has less control of the investment strategy it s important to check if the tamps investment strategy mirrors that of your risk tolerance and investment goals | turnkey asset management programs tamps faqsthe largest tamps are mount yale capital group adhesion wealth matson money sawtooth solutions orion portfolio brinker capital buckingham strategic partners assetmark independent advisor solution by sei and envestnet 2choosing the right tamp as an advisor is based on a lot of factors consider how the tamp aligns with your investment strategy the type of relationship the tamp will have with your custodian the fees the tamp charges if the tamp works on your internal platform what additional services does the tamp provide what is their support management like and do they offer additional technology turnkey asset management programs started in the early 1980s 3the bottom lineturnkey asset management programs tamps are investment solutions that financial institutions can use to help manage their client s investment accounts tamps are fee based services and can provide investment advisors with a handful of services to help them better their services in choosing a tamp an advisor should consider the costs investment strategies and other services the tamp provides to determine whether it is the right solution for them and for their clients | |
what is a turnkey business | a turnkey business is a business that is ready to use existing in a condition that allows for immediate operation the term turnkey is based on the concept of only needing to turn the key to unlock the doors to begin operations to be fully considered a turnkey solution the business must function correctly and at full capacity from the moment when it is initially received | |
how turnkey businesses work | a turnkey business is an arrangement where the provider assumes responsibility for all required setup and ultimately provides the business to the new operator only upon completion of the aforementioned requirements a turnkey business often already has a proven successful business model and merely requires investment capital and labor the term refers to a corporate buyer just having to turn a key to commence business activity a turnkey business is thus a business that is ready to use existing in a condition that allows for immediate operation the term turnkey is based on the concept of only needing to turn the key to unlock the doors to begin operations to be fully considered turnkey the business must function correctly and at full capacity from when it is initially received the turnkey cost of such a business may involve franchising fees rent insurance inventory and so on turnkey businesses and franchisesoften used in franchising a firm s high level management plans and executes all business strategies to ensure that individuals can buy a franchise or business and start operating immediately most franchises are built within a specific pre existing framework with predetermined supply lines for the goods required to begin operations franchises may not have to participate in advertising decisions as those may be governed by a larger corporate body the advantage of purchasing a franchise is that the business model is generally considered to be proven resulting in a lower overall failure rate some corporate entities ensure that no other franchise is set up within the territory of an existing franchise limiting internal competition the disadvantage of a franchise is that the nature of the operations may be highly restrictive a franchisee may be subject to contractual obligations such as items that can or cannot be offered or where supplies may be purchased direct sales and multi level marketing mlm businesses such as mary kay can also be seen as turnkey businesses based on how little it takes to have them up and running often a person only needs to sign up for the particular service as a consultant and pay fees for the inventory required to perform the work a consultant is not an employee of the company instead the consultant functions as an independent entity profits are made based on the difference between the supply costs and the price at which the items are ultimately sold aside from franchises any existing business that s already up and running successfully or a new business whose doors are ready to be opened could be considered a turnkey business in these cases if the business has a proven track record the risk may be lower compared to starting a new business from scratch and it may also provide more control over business decisions than a franchise model however it may be challenging to get an accurate valuation before the business is purchased as well as information about why the business is for sale there are no preset methods for increasing the likelihood of success in cases where the current performance of the business is lacking in some way a turnkey property is a fully renovated home or apartment building that an investor can purchase and immediately rent out turnkey properties are typically purchased from companies that specialize in the restoration of older properties those same firms may also offer property management services to buyers minimizing the amount of time and effort they have to put into the rental this investment approach is especially appealing to individuals who desire exposure to the real estate market but who do not have the time or ability interest to renovate a home or handle maintenance issues in most cases the investor will hire a separate company to manage the property | |
what is a turnkey property | a turnkey property is a fully renovated home or apartment building that an investor can purchase and immediately rent out a turnkey home is often a property purchased from a company that specializes in the restoration of older properties those same firms may also offer property management services to buyers minimizing the amount of time and effort they have to put into the rental | |
how a turnkey property works | turnkey properties grew in popularity following the housing market decline of 2007 2008 when it became cheaper to buy homes than rent them in most parts of the united states in fact nationwide buying is 30 cheaper than renting and in many low cost of living regions it s even cheaper than that in markets where real estate is particularly expensive such as new york investors will often seek to create revenue streams by buying rental properties in parts of the country where property is cheaper and hiring property managers to take care of the rentals for them leaving them to do little more than collect profits from afar this investment approach is especially appealing to individuals who desire exposure to the real estate market but who do not have the time or ability interest to renovate a home or handle maintenance issues in most cases the investor will hire a separate company to manage the property often there will already be a tenant in the property when it changes hands simplifying matters for the investor even further the term turnkey property is not used solely by investors however in marketing literature realty companies sometimes use the phrase to describe any renovated move in ready home that is up for sale while some homebuyers relish the thought of renovating a property themselves those with busy lifestyles or who lack home improvement skills may prefer a turnkey property that needs no work | |
how a turnkey property is used to generate revenue | the purchase of turnkey property is expected to allow the new buyer to make it available for tenants immediately by acquiring real estate that requires little to no refurbishment the intent is to quickly generate revenue through renting the property as quickly as possible the extent of the work necessary to bring a residence to turnkey status can include replacement of electrical fixtures repairs to plumbing fresh paint for the interior and fixes to the flooring where necessary the shorter the turnaround to rent the property the faster the new buyer may start seeing a return on their investment the effectiveness and worth of fully renovating a home or other dwelling may be questioned if the goal is to put the property up for sale rather than for rent the expenses that may be put toward repairs and say fresh paint might not be a selling point as prospective buyers could want to make alterations to the property that could include tearing out or doing away with the very refurbishment done by the current owner also the money spent making those repairs will likely increase the asking price of the seller in some instances particularly for selling a residence it may be more efficient to see that repairs are done that bring the building up to code but little more | |
what is a turnkey solution | a turnkey solution is a type of system built end to end for a customer that can be easily implemented into a current business process it is immediately ready to use upon implementation and is designed to fulfill a certain process such as manufacturing in part or whole billing website design training or content management a turnkey solution system is different than a custom built or designed system when a company or business isn t looking for multiple bells and whistles a turnkey solution may be an affordable and simple option in a turnkey solution a corporate buyer just has to turn a key to commence a business activity in the newly built structure solution evolved in the turnkey concept as economies became more service based a possible drawback of this method as opposed to designing a process in house or a custom built system is that specifications that are important to a particular company may not be sufficiently integrated into the solution in house or custom built versus turnkey decisions take the complexity of a business process into consideration with rapid advances in technology software and hardware turnkey solutions are popular for businesses that desire speed to market other types of turnkey termstraditionally turnkey as a term is commonly applied to construction projects such as warehouses other purpose built buildings or houses the idea is that the building contractor finishes a product that the buyer can utilize immediately a turnkey property is usually a newly renovated and updated apartment building or home that is move in ready for buyers or renters real estate companies property sellers and buyers and real estate investors often describe new buildings or homes as turnkey ready a turnkey business may refer to a business that can be purchased without having to make any changes to the business model or products sold for example a franchise like taco bell is a type of turnkey business pros and cons of turnkey solutionsa turnkey solution may be the most affordable way to construct something end to end that is beneficial to multiple users however turnkey solutions may not take into account the individual needs of a company a turnkey solution for content management software offered by a third party company may be cheaper to purchase but it may not cover all the needs of the purchaser example of a turnkey solutiona company looking to implement an online billing feature on its website can use third party providers to process each transaction and handle all the technical issues surrounding this process the use of a turnkey solution in this case allows the company to avoid the headaches of programming the tool in house and the approvals associated with developing a billing system from scratch | |
what is turnover | turnover is how quickly a company has replaced assets within a specific period it can include selling inventory collecting receivables or replacing employees it can also represent the percentage of an investment portfolio that is replaced turnover might also mean something different depending on the area you re in for instance overall turnover is a common synonym for a company s total revenues in europe and asia investopedia zoe hansenunderstanding turnoverturnover ratios calculate how quickly a business conducts operations this measures efficiency and how well it is using its resources two of the largest assets owned by a business are usually accounts receivable and inventory if any is kept both of these accounts require a significant cash investment and it is important to measure how quickly a business collects cash turnover ratios are used by fundamental analysts and investors to assist them in determining if a company is managing its finances and assets correctly common types of turnover ratios include companies can better assess the efficiency of their operations by looking at a range of these ratios good turnover ratios can be high mid range or low depending on what a company is measuring for instance a low accounts receivable turnover ratio means a company s collection procedures or credit issuing policies might need to be fixed however the same company might be a retailer with a high inventory turnover ratio which can indicate strong sales | |
what is accounts receivable turnover | accounts receivable represents the total dollar amount of unpaid customer invoices at any point in time assuming that credit sales are sales not immediately paid in cash the accounts receivable turnover formula is credit sales divided by average accounts receivable the average accounts receivable is simply the average of the beginning and ending accounts receivable balances for a particular period such as a month or year the accounts receivable turnover formula tells you how quickly you collect payments compared to your credit sales for example if credit sales for the month total 300 000 and the account receivable balance is 50 000 then the turnover rate is six the goal is to maximize sales minimize the receivable balance and generate a large turnover rate accounts payable turnover sales divided by average payables is a short term liquidity measure that measures the rate at which a company pays back its suppliers and vendors | |
what is inventory turnover | the inventory turnover formula which is stated as the cost of goods sold cogs divided by average inventory is similar to the accounts receivable formula | |
when you sell inventory the balance is moved to the cost of sales which is an expense account the goal as a business owner is to maximize the amount of inventory sold while minimizing the inventory that is kept on hand for example if the cost of sales for the month totals 400 000 and you carry 100 000 in inventory your turnover rate is four which indicates that you sold your entire inventory four times that month | inventory turnover also known as sales turnover helps investors determine the level of risk that they will face if providing operating capital to a company retailers tend to have the highest inventory turnover the speed can be a factor of the industry in general or indicate a well run company the reciprocal of the inventory turnover ratio 1 inventory turnover is the days sales of inventory dsi this tells you how many days it takes on average to completely sell and replace a company s inventory | |
what is portfolio turnover | turnover is a term that is also used for investments in this context turnover measures the percentage of an investment portfolio that is sold in a set period for instance assume a mutual fund has 100 million in assets under management and the portfolio manager sells 20 million in securities during the year the rate of turnover is 20 million divided by 100 million or 20 a 20 portfolio turnover ratio could be interpreted to mean that the value of the trades represented one fifth of the assets in the fund however it might also indicate a need to investigate further and determine why the mutual fund needed to replace 20 of its holdings in one year in some cases the fund s manager might be churning the portfolio or replacing holdings to generate commissions portfolios that are actively managed should have a higher rate of turnover while a passively managed portfolio may have fewer trades during the year the actively managed portfolio will generate more trading costs which reduces the rate of return on the portfolio investment funds with excessive turnover are often considered to be low quality asset turnoverthe asset turnover ratio measures how well a company generates revenue from its assets during the year asset turnover total sales beginning assets ending assets 2 where total sales annual sales total beginning assets assets at start of year ending assets assets at end of year begin aligned text asset turnover frac text total sales frac text beginning assets text ending assets 2 textbf where text total sales text annual sales total text beginning assets text assets at start of year text ending assets text assets at end of year end aligned asset turnover 2beginning assets ending assets total sales where total sales annual sales totalbeginning assets assets at start of yearending assets assets at end of year you can also use just the assets at the end of the period instead of the average for the year to calculate the ratio investors use this ratio to compare similar companies in the same sector or group | |
what is the meaning of turnover in business | there are several different business turnover ratios used such as accounts receivable inventory asset portfolio and working capital these turnover ratios are how quickly the company replaces them | |
what is turnover in the workplace | workplace turnover generally refers to the rate at which employees leave and join a company it is commonly called the employee turnover ratio and is generally an indicator of employee morale it also is associated with the high costs of replacing exiting employees | |
is turnover your profit | profit refers to a company s total revenues minus its expenses turnover is how quickly a company has sold its inventory collected payments compared with sales or replaced assets over a specific period generally speaking turnover looks at the speed and efficiency of a company s operations profit looks at how much money the company makes after expenses the bottom lineturnover can be either an accounting concept or an investing concept in accounting it measures how quickly a business conducts its operations in investing turnover looks at what percentage of a portfolio is sold in a set period a business will have many types of turnover to measure but the most common are inventory and accounts receivable accounts receivable turnover shows how quickly a business collects payments inventory turnover shows how fast a company sells its entire inventory investors can look at both types of turnover to assess how efficiently a company works | |
what is a turnover ratio | the turnover ratio or turnover rate in investing is the percentage of a mutual fund or other portfolio holdings that have been replaced in the course of one year some funds hold their equity positions for less than 12 months meaning their turnover ratios exceed 100 that doesn t necessarily mean that every holding has been replaced the ratio reflects the proportion of stocks that have changed in one year formula and calculation of the turnover ratiothe turnover ratio will be listed in the company s prospectus for the mutual fund it would be difficult for an investor to work it out since it would require knowing the sales price of every transaction made during the year and the average monthly net value of the fund over 12 months the formula is as follows turnover ratio total dollar value of all new portfolio assets or value of portfolio assets sold if that is the smaller monthly average net assets of the fund in dollars x 100 | |
what the turnover ratio can tell you | the turnover ratio varies by the type of mutual fund its investment objective and the portfolio manager s investing style for example a stock market index fund will have a low turnover rate since it duplicates a particular index and replaces holdings only when the index changes an actively traded mutual fund may have a high turnover rate depending on how aggressively its manager buys and sells holdings in search of better returns actively managed mutual funds with a low turnover ratio reflect a buy and hold investment strategy funds with high turnover ratios indicate an attempt to profit by a market timing approach an aggressive small cap growth stock fund will generally experience higher turnover than a large cap value stock fund as a technical indicator the turnover ratio itself has no intrinsic value a high turnover ratio is not necessarily bad nor is a low turnover ratio necessarily good however investors should be aware of the consequences of turnover frequency high turnover often results in increased costs for the fund due to the payment of spreads and commissions when buying and selling stocks these increased costs are passed on to the investors and are reflected in the fund s return overall also the more portfolio turnover in a fund the more likely it is to generate short term capital gains these are profits on assets held for less than one year and are taxable at an investor s ordinary income rate which is often higher than the capital gains rate 12a mutual fund s turnover ratio shouldn t be the sole basis of a decision to invest or divest in it however it can be useful to see how a particular fund s turnover ratio compares with others of the same type of investment approach a low turnover ratio is considered to be between 20 and 30 while a high turnover ratio is considered to be 100 or more so an investor willing to take some risk yet be somewhat conservative might target funds with turnover ratios around 50 3if a fund s turnover ratio is significantly out of line with that of comparable funds it might be something to note say that most funds in a particular sector have turnover ratios around 5 but one fund posts a 25 turnover in one year in this instance the investor might want to know why did a new portfolio manager come in and decide to wipe the slate clean was there a change in the fund s objective or say that most funds in another sector have 75 turnover ratios but there is one with a ratio of 35 is management there asleep at the wheel turnover ratio alone shouldn t be a deciding factor but an abnormally high or low ratio among comparable funds is a reason to look harder at the fund s performance over time to see just how successful its strategy has been examples of how to use the turnover ratiothe bny mellon appreciation fund from fidelity dgagx has a strong buy and hold strategy in mostly blue chip companies with total market capitalizations of over 5 billion at the time of purchase those companies show sustained profitability strong balance sheets global expansion and above average earnings growth in keeping with the fund s objective of capital preservation as of dec 31 2023 the fund s turnover ratio was 3 76 4fidelity s rydex s p small cap 600 pure growth fund rysgx invests in the common stock of companies within the capitalization range of the underlying s p small cap 600 index and derivative instruments at least 80 of the fund s net assets are invested in fast growing companies or firms in up and coming industries and it seeks to match the index s performance on a daily basis at the end of march 31 2023 the rydex fund had an average turnover ratio of 812 5 | |
what is a turnover ratio in a business | the turnover ratio has a variety of meanings outside of the investing world a turnover ratio in business is a measurement of the firm s efficiency it is calculated by dividing annual income by annual liability it can be applied to the cost of inventory or any other business cost unlike in investing a high turnover ratio in business is almost always a good sign it may show for example that the business is selling its stock out as quickly as it can get it in | |
what is a turnover ratio in a company | perhaps the most common use of a turnover ratio is to measure the proportion of a company s employees who are replaced during a year a low employee turnover rate indicates that people seldom leave the company a high turnover rate means they re fleeing in large numbers there s no good or bad turnover rate some industries have high turnover rates by their nature tech has a high turnover ratio because its employees are in high demand elsewhere the retail and hospitality industries have high turnover ratios because their jobs are ill paid and tough to do 678 | |
how do i check the turnover ratio for my mutual fund | you should find the turnover ratio or turnover rate in the issuing company s latest financial statement on the mutual fund for example vanguard lists the turnover rate for its vanguard health care fund investor shares as 16 3 as of jan 31 2024 it is an item in its fundamental list for the fund 9the bottom lineturnover ratio alone won t help you determine whether a mutual fund is the right choice for you it simply tells you what percentage of stocks and other assets in the fund have been replaced in the course of the year it could be relevant to your research into mutual funds however if comparable mutual funds have higher or lower turnover ratios than the fund you re looking at it s a signal to look further into the fund s performance you may find that it s achieving better returns over time due to all of that activity or lack of activity if it s not you might look at rival funds for a better choice | |
what is a tweezer | a tweezer is a technical analysis pattern commonly involving two candlesticks that can signify either a market top or bottom understanding tweezerstweezer patterns are reversal patterns and occur when two or more candlesticks touch the same bottom for a tweezer bottom pattern or when two or more candlesticks touch the same top for a tweezer top pattern tweezer bottoms are considered to be short term bullish reversal patterns whereas tweezer tops are thought to be bearish reversals essentially with both formations either buyers or sellers were not able to push the top or bottom any further both types of patterns require close observation and research to be interpreted and used correctly a tweezers top is identified by two candles with similar highs occurring back to back a tweezers bottom would see two candles instead with similar back to back lows special considerationsas an investment strategy tweezers offer traders a level of precision when seeking to take advantage of market trends while tweezers can take on a variety of appearances they all have a couple of traits in common sometimes appearing at market turning points these candlestick patterns can be used for analysis purposes to simply indicate the possibility of a reversal or they can be used within a broader context of market analysis to provide trade signals for trend traders tweezers were made mainstream in steve nison s popular candlestick charting book japanese candlestick charting techniques 1 candlestick methods are characterized by the body of a candle which is created by the difference between the open and close while the thin shadows on either end of the candle mark the high and low over that period typically a dark or red candle indicates the close was below the open while a white or green candle highlights the price closing higher than it opened as with any other trading tool or indicator tweezers should be used in conjunction with other indicators or market signals investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is the 28 36 rule | the 28 36 rule refers to a common sense approach used to calculate the amount of debt an individual or household should assume a household should spend a maximum of 28 of its gross monthly income on total housing expenses according to this rule and no more than 36 on total debt service this includes housing and other debt such as car loans and credit cards lenders often use this rule to assess whether to extend credit to borrowers understanding the 28 36 rulelenders use varying criteria to determine whether to approve credit applications one of the main considerations is an individual s credit score lenders usually require that a credit score must fall within a certain range but a credit score is not the only consideration lenders also consider a borrower s income and debt to income dti ratio another factor is the 28 36 rule which is an important calculation that determines a consumer s financial status it helps determine how much debt a consumer can safely assume based on their income other debts and financial needs the premise is that debt loads over the 28 36 parameters are likely difficult for an individual or household to sustain they may eventually lead to default this rule is a guide that lenders use to structure underwriting requirements some lenders may vary these parameters based on a borrower s credit score potentially allowing high credit score borrowers to have slightly higher dti ratios most traditional mortgage lenders require a maximum household expense to income ratio of 28 and a maximum total debt to income ratio of 36 for loan approval lenders that use the 28 36 rule in their credit assessments may include questions about housing expenses and comprehensive debt accounts in their credit applications special considerationsthe 28 36 rule is a standard that most lenders use before advancing any credit so consumers should be aware of the rule before they apply for any type of loan lenders pull credit checks for every application they receive these hard inquiries show up on a consumer s credit report having multiple inquiries over a short period can affect a consumer s credit score and may hinder their chance of getting credit in the future example of the 28 36 rulelet s say an individual or family brings home a monthly income of 5 000 they could budget up to 1 400 for a monthly mortgage payment and housing expenses if they want to adhere to the 28 36 rule but it would leave an additional 800 for making other types of loan repayments if they confined their housing expenses to just 1 000 or 20 | |
what is gross income | your gross income is your income from all sources before any taxes retirement contributions or employee benefits have been withheld or deducted the balance after these deductions is referred to as your net income this is the amount you receive in your paychecks the 28 36 rule is based on your gross monthly income 1 | |
what is included in housing expenses | lenders will typically include in your monthly mortgage payment property taxes homeowners insurance premiums and homeowners association fees if any in your housing expenses some lenders may include your utilities too but this would generally be categorized as contributing to your total debts | |
how is my debt to income ratio calculated | your debt to income ratio is calculated by dividing all your monthly debt payments by your gross monthly income your debt payments include your mortgage any auto loan s and payments toward credit cards personal loans student loans and home equity loans 2the bottom lineeach lender establishes its own parameters for housing debt and total debt as a part of its underwriting process this process is what ultimately determines if you ll qualify for a loan household expense payments primarily rent or mortgage payments can be no more than 28 of your gross income and your total debt payments cannot exceed 36 of your income to meet the 28 36 rule 3you might be granted some leeway if you have a very good to excellent credit score so consider working to improve your score if your 28 36 calculation is borderline | |
what is two and twenty | two and twenty or 2 and 20 is a fee arrangement that is standard in the hedge fund industry and is also common in venture capital and private equity hedge fund management companies typically charge clients both a management and a performance fee two means 2 of assets under management aum and refers to the annual management fee charged by the hedge fund for managing assets twenty refers to the standard performance or incentive fee of 20 of profits made by the fund above a certain predefined benchmark while this lucrative fee arrangement has resulted in many hedge fund managers becoming extremely wealthy in recent years the fee structure has come under fire from investors and politicians for varying reasons | |
how two and twenty works | the 2 management fee is paid to hedge fund managers regardless of the fund s performance a hedge fund manager with 1 billion aum earns 20 million in management fees annually even if the fund performs poorly the 20 performance fee is charged if the fund achieves a level of performance that exceeds a certain base threshold known as the hurdle rate the hurdle rate could either be a preset percentage or may be based on a benchmark such as the return on an equity or bond index some hedge funds also have to contend with a high watermark that is applicable to their performance fee a high watermark policy specifies that the fund manager will only be paid a percentage of the profits if the fund s net value exceeds its previous highest value this precludes the fund manager from being paid large sums for poor performance and ensures that any losses must be made up before performance fees are paid out two and twenty adding up to billionsthe ten highest paid hedge fund managers collectively made 7 7 billion in fees in 2018 taking their combined net worth to 70 7 billion according to bloomberg 1 the table below shows the top five fund managers who raked in the most in 2018 the giant hedge funds founded by these fund titans grew so large that they generated hundreds of millions in management fees alone their successful strategies over many years if not decades have also earned these funds billions in performance fees while the steep fees charged by star hedge fund managers may be justified by their sustained outperformance the billion dollar question is whether the majority of fund managers generate sufficient returns to justify their two and twenty fee model | |
is two and twenty justified | jim simons the highest paid hedge fund manager in recent years founded renaissance technologies in 1982 an award winning mathematician and former nsa code breaker simons established renaissance as a quant fund that employs sophisticated quantitative models and techniques in its trading strategies one of the world s most successful hedge funds renaissance is best known for the tremendous returns generated by its flagship medallion fund simons launched medallion in 1988 and over the next 30 years it generated an average annual return of about 40 including an average return of 71 8 annually between 1994 and 2014 those returns are after renaissance s management fees of 5 and performance fees of 44 medallion has been closed to outside investors since 2005 and currently only manages money for renaissance employees renaissance had 75 billion in aum as of april 2020 so even though simons stepped down as its head in 2010 those outsized fees should continue contributing to the growth in his net worth but such stellar performances tend to be the exception rather than the norm in the hedge fund industry while hedge funds by definition are expected to make money in any market because of their ability to go long and short their performance has lagged equity indices for years in the ten years from 2009 to 2018 hedge funds had an average annualized return of 6 09 percent according to data provider hedge fund research hfr less than half of the s p 500 s 15 82 annual return over this period in 2018 hedge funds returned 4 07 versus the s p 500 s total return including dividends of 4 38 based on data from hfr an analysis by cnbc revealed that 2018 was the first time in a decade that hedge funds had outperformed the s p 500 although only by a wafer thin margin warren buffett in his february 2017 letter to berkshire hathaway shareholders estimated that the search by the financial elite such as wealthy individuals pension funds and college endowments all of whom tend to be typical hedge fund investors for superior investment advice has caused it to waste more than 100 billion in aggregate over the past decade 2 two and twenty updatedchronic underperformance and high fees are causing investors to bail out of hedge funds with a net 94 3 billion withdrawn since the beginning of 2016 strong performances by most markets enabled hedge fund industry assets to increase by 78 8 billion in the first quarter of 2019 to 3 18 trillion globally about 2 below the record level of 3 24 in the third quarter of 2018 according to hfr the proliferation of hedge funds with more than 11 000 estimated to be in operation today compared with fewer than 1 000 funds 30 years ago has also resulted in some downward pressure on fees the average fund currently charges a management fee of 1 5 and 17 performance fee compared with 1 6 and 20 10 years ago hedge fund managers are also coming under pressure from politicians who want to reclassify performance fees as ordinary income for tax purposes rather than capital gains while the 2 management fee charged by hedge fees is treated as ordinary income the 20 fee is treated as capital gains because the returns are typically not paid out but are treated as if they were reinvested with the fund investors monies this carried interest in the fund enables high income managers in hedge funds venture capital and private equity to have this income stream taxed at the capital gains rate of 23 8 instead of the top ordinary rate of 37 in march 2019 congressional democrats reintroduced legislation to end the much reviled carried interest tax break 3 an example of two and twentyassume hypothetical hedge fund peak to trough investments pti had 1 billion in aum at the beginning of year 1 and is closed to investors the fund s aum grows to 1 15 billion at the end of year 1 but by the end of year 2 aum falls to 920 million before rebounding to 1 25 billion by the end of year 3 if the fund charges the standard two and twenty the total annual fees made by the fund at the end of each year can be calculated as follows year 1 fund aum at beginning of year 1 1 000mfund aum at end of year 1 1 150mmanagement fee 2 of year end aum 23mperformance fee 20 of fund growth 150m x 20 30mtotal fund fees 23m 30m 53myear 2 fund aum at beginning of year 2 1 150mfund aum at end of year 2 920mmanagement fee 2 of year end aum 18 4mperformance fee not payable as high watermark of 1 150m has not been exceededtotal fund fees 18 4myear 3 fund aum at beginning of year 3 920mfund aum at end of year 3 1 250mmanagement fee 2 of year end aum 25mperformance fee 20 of fund growth above high watermark 100m x 20 20mtotal fund fees 25m 20m 45m | |
what is two bin inventory control | two bin inventory control is a system used to determine when items or materials used in production should be replenished when items in the first bin have been depleted an order is placed to refill or replace them the second bin is then supposed to have enough items to last until the order for the first bin arrives in short the first bin has a minimum of working stock and the second bin keeps reserve stock or remaining material the two bin inventory control method is also sometimes referred to as kanban which is strongly associated with the just in time jit method of a manufacturing process | |
how two bin inventory control works | effectively managing stock levels is one of the biggest challenges that companies face not having enough inventory can result in missing out on sales opportunities and losing out to competitors holding too much stock on the other hand increases the possibility of damage spoilage theft and falling victim to shifts in demand it also means higher storage costs and delays recouping money from purchased goods to reinvest in the business the two bin inventory control system is a basic technique used to ensure that companies reduce these risks and always have more or less the right level of stock to meet demand without overdoing it in its simplest form the process can be broken down like this this system is broadly employed across different industries that involve manufacturing operations and is also effective for hospital inventory control special considerationstwo bin inventory control is almost always used for small or low value items that can be easily purchased and stored in bulk in contrast higher value items are subject to the perpetual inventory system moreover depending on historical patterns of variance in the depletion rate of the working stock bin no 1 the amount ordered for the reserve stock bin no 2 can be adjusted it is essential that the new order placed after the first bin is emptied arrives before the second bin is empty otherwise the process does not work as intended the inventory approach used for both bins is first in first out fifo given that the inventory placed in the first bin is also the inventory that is first sold in general the following calculation is used to determine how much inventory to keep in the reserve stock bin daily usage rate lead time safety stockexample of two bin inventory controlcompany a is a small manufacturer that goes through various types of nuts and bolts to piece together its products fasteners are among the many items it orders from outside suppliers it uses roughly 800 of them per week or 160 per day with a lead time the period between the beginning and completion of a production process of three days according to the first calculation above company a s reserve bin should stock at least 480 fasteners however management is also aware that usage levels can sometimes fluctuate by as much as 15 so as a precautionary measure chooses to add some more fasteners to its reserve storage bin this safety stock could come in handy if demand picks up and production rates increase as they have in the past | |
what is a two tailed test | a two tailed test in statistics is a method in which the critical area of a distribution is two sided and tests whether a sample is greater than or less than a certain range of values it is used in null hypothesis testing and testing for statistical significance if the sample being tested falls into either of the critical areas the alternative hypothesis is accepted instead of the null hypothesis 1understanding a two tailed testa basic concept of inferential statistics is hypothesis testing which determines whether a claim is true or not given a population parameter a hypothesis test that is designed to show whether the mean of a sample is significantly greater than and significantly less than the mean of a population is referred to as a two tailed test the two tailed test gets its name from testing the area under both tails of a normal distribution although the test can be used in other non normal distributions a two tailed test is designed to examine both sides of a specified data range as designated by the probability distribution involved the probability distribution should represent the likelihood of a specified outcome based on predetermined standards this requires the setting of a limit designating the highest or upper and lowest or lower accepted variable values included within the range any data point that exists above the upper limit or below the lower limit is considered out of the acceptance range and in an area referred to as the rejection range there is no inherent standard about the number of data points that must exist within the acceptance range in instances where precision is required such as in the creation of pharmaceutical drugs a rejection rate of 0 001 or less may be instituted in instances where precision is less critical such as the number of food items in a product bag a rejection rate of 5 may be appropriate special considerationsa two tailed test can also be used practically during certain production activities in a firm such as with the production and packaging of candy at a particular facility if the production facility designates 50 candies per bag as its goal with an acceptable distribution of 45 to 55 candies any bag found with an amount below 45 or above 55 is considered within the rejection range to confirm the packaging mechanisms are properly calibrated to meet the expected output random sampling may be taken to confirm accuracy a simple random sample takes a small random portion of the entire population to represent the entire data set where each member has an equal probability of being chosen for the packaging mechanisms to be considered accurate an average of 50 candies per bag with an appropriate distribution is desired additionally the number of bags that fall within the rejection range needs to fall within the probability distribution limit considered acceptable as an error rate here the null hypothesis would be that the mean is 50 while the alternate hypothesis would be that it is not 50 if after conducting the two tailed test the z score falls in the rejection region meaning that the deviation is too far from the desired mean then adjustments to the facility or associated equipment may be required to correct the error regular use of two tailed testing methods can help ensure production stays within limits over the long term be careful to note if a statistical test is one or two tailed as this will greatly influence a model s interpretation two tailed vs one tailed test | |
when a hypothesis test is set up to show that the sample mean would be only higher than the population mean this is referred to as a one tailed test a formulation of this hypothesis would be for example that the returns on an investment fund would be at least x one tailed tests could also be set up to show that the sample mean could be only less than the population mean the key difference from a two tailed test is that in a two tailed test the sample mean could be different from the population mean by being either higher or lower than it | if the sample being tested falls into the one sided critical area the alternative hypothesis will be accepted instead of the null hypothesis a one tailed test is also known as a directional hypothesis or directional test a two tailed test on the other hand is designed to examine both sides of a specified data range to test whether a sample is greater than or less than the range of values example of a two tailed testas a hypothetical example imagine that a new stockbroker named xyz claims that their brokerage fees are lower than that of your current stockbroker abc data available from an independent research firm indicates that the mean and standard deviation of all abc broker clients are 18 and 6 respectively a sample of 100 clients of abc is taken and brokerage charges are calculated with the new rates of xyz broker if the mean of the sample is 18 75 and the sample standard deviation is 6 can any inference be made about the difference in the average brokerage bill between abc and xyz broker this calculated z value falls between the two limits defined by z2 5 1 96 and z2 5 1 96 this concludes that there is insufficient evidence to infer that there is any difference between the rates of your existing broker and the new broker therefore the null hypothesis cannot be rejected alternatively the p value p z 1 25 p z 1 25 2 0 1056 0 2112 21 12 which is greater than 0 05 or 5 leads to the same conclusion | |
how is a two tailed test designed | a two tailed test is designed to determine whether a claim is true or not given a population parameter it examines both sides of a specified data range as designated by the probability distribution involved as such the probability distribution should represent the likelihood of a specified outcome based on predetermined standards | |
what is the difference between a two tailed and one tailed test | a two tailed hypothesis test is designed to show whether the sample mean is significantly greater than or significantly less than the mean of a population the two tailed test gets its name from testing the area under both tails sides of a normal distribution a one tailed hypothesis test on the other hand is set up to show only one test that the sample mean would be higher than the population mean or in a separate test that the sample mean would be lower than the population mean | |
what is a z score | a z score numerically describes a value s relationship to the mean of a group of values and is measured in terms of the number of standard deviations from the mean if a z score is 0 it indicates that the data point s score is identical to the mean score whereas z scores of 1 0 and 1 0 would indicate values one standard deviation above or below the mean in most large data sets 99 of values have a z score between 3 and 3 meaning they lie within three standard deviations above and below the mean | |
what is a two way anova | anova stands for analysis of variance and tests for differences in the effects of independent variables on a dependent variable a two way anova test is a statistical test used to determine the effect of two nominal predictor variables on a continuous outcome variable a two way anova tests the effect of two independent variables on a dependent variable 1 a two way anova test analyzes the effect of the independent variables on the expected outcome along with their relationship to the outcome itself random factors would be considered to have no statistical influence on a data set while systematic factors would be considered to have statistical significance by using anova a researcher is able to determine whether the variability of the outcomes is due to chance or to the factors in the analysis anova has many applications in finance economics science medicine and social science understanding two way anovaan anova test is the first step in identifying factors that influence a given outcome once an anova test is performed a tester may be able to perform further analysis on the systematic factors that are statistically contributing to the data set s variability a two way anova test reveals the results of two independent variables on a dependent variable anova test results can then be used in an f test a statistical test used to determine whether two populations with normal distributions share variances or a standard deviation on the significance of the regression formula overall analysis of variances is helpful for testing the effects of variables on one another it is similar to multiple two sample t tests however it results in fewer type 1 errors and is appropriate for a range of issues an anova test groups differences by comparing the means of each group and includes spreading out the variance across diverse sources it is employed with subjects test groups between groups and within groups one way anova vs two way anovathere are two main types of analysis of variance one way or unidirectional and two way bidirectional one way or two way refers to the number of independent variables in your analysis of variance test a one way anova evaluates the impact of a sole factor on a sole response variable it determines whether the observed differences between the means of independent unrelated groups are explainable by chance alone or whether there are any statistically significant differences between groups a two way anova is an extension of the one way anova with a one way you have one independent variable affecting a dependent variable with a two way anova there are two independents for example a two way anova allows a company to compare worker productivity based on two independent variables such as department and gender it is utilized to observe the interaction between the two factors it tests the effect of two factors at the same time a three way anova also known as three factor anova is a statistical means of determining the effect of three factors on an outcome | |
what is a type i error | in statistical research a type 1 error is when the null hypothesis is rejected which incorrectly leads to the study stating that notable differences were found in the variables when actually there were no differences put simply a type i error is a false positive result making a type i error often can t be avoided because of the degree of uncertainty involved a null hypothesis is established during hypothesis testing before a test begins in some cases a type i error assumes there s no cause and effect relationship between the tested item and the stimuli to trigger an outcome to the test | |
how a type i error works | hypothesis testing is a testing process that uses sample data the test is designed to provide evidence that the hypothesis or conjecture is supported by the data being tested a null hypothesis is a belief that there is no statistical significance or effect between the two data sets variables or populations being considered in the hypothesis a researcher would generally try to disprove the null hypothesis for example let s say the null hypothesis states that an investment strategy doesn t perform any better than a market index like the s p 500 the researcher would take samples of data and test the historical performance of the investment strategy to determine if the strategy performed at a higher level than the s p if the test results show that the strategy performed at a higher rate than the index the null hypothesis is rejected this condition is denoted as n 0 if the result seems to indicate that the stimuli applied to the test subject caused a reaction when the test is conducted the null hypothesis stating that the stimuli do not affect the test subject then needs to be rejected a null hypothesis should ideally never be rejected if it s found to be true it should always be rejected if it s found to be false however there are situations when errors can occur false positive type i errora type i error is also called a false positive result this result leads to an incorrect rejection of the null hypothesis it rejects an idea that shouldn t have been rejected in the first place rejecting the null hypothesis under the assumption that there is no relationship between the test subject the stimuli and the outcome may sometimes be incorrect if something other than the stimuli causes the outcome of the test it can cause a false positive result 1examples of type i errorslet s look at a couple of hypothetical examples to show how type i errors occur type i errors commonly occur in criminal trials where juries are required to come up with a verdict of either innocent or guilty in this case the null hypothesis is that the person is innocent while the alternative is guilty a jury may come up with a type i error if the members find that the person is found guilty and is sent to jail despite actually being innocent in medical testing a type i error would cause the appearance that a treatment for a disease has the effect of reducing the severity of the disease when in fact it does not when a new medicine is being tested the null hypothesis will be that the medicine does not affect the progression of the disease let s say a lab is researching a new cancer drug their null hypothesis might be that the drug does not affect the growth rate of cancer cells after applying the drug to the cancer cells the cancer cells stop growing this would cause the researchers to reject their null hypothesis that the drug would have no effect if the drug caused the growth stoppage the conclusion to reject the null in this case would be correct however if something else during the test caused the growth stoppage instead of the administered drug this would be an example of an incorrect rejection of the null hypothesis i e a type i error | |
how does a type i error occur | a type i error occurs when the null hypothesis which is the belief that there is no statistical significance or effect between the data sets considered in the hypothesis is mistakenly rejected the type i error should never be rejected even though it s accurate it is also known as a false positive result | |
what is the difference between a type i and type ii error | type i and type ii errors occur during statistical hypothesis testing while the type i error a false positive rejects a null hypothesis when it is in fact correct the type ii error a false negative fails to reject a false null hypothesis for example a type i error would convict someone of a crime when they are actually innocent a type ii error would acquit a guilty individual when they are guilty of a crime | |
what is a null hypothesis | a null hypothesis occurs in statistical hypothesis testing it states that no relationship exists between two data sets or populations when a null hypothesis is accurate and rejected the result is a false positive or a type i error when it is false and fails to be rejected a false negative occurs this is also referred to as a type ii error | |
what s the difference between a type i error and a false positive | a type i error is often called a false positive this occurs when the null hypothesis is rejected even though it s correct the rejection takes place because of the assumption that there is no relationship between the data sets and the stimuli as such the outcome is assumed to be incorrect the bottom linehypothesis testing is a form of testing that uses data sets to either accept or determine a specific outcome using a null hypothesis although we often don t realize it we use hypothesis testing in our everyday lives this comes in many areas such as making investment decisions or deciding the fate of a person in a criminal trial sometimes the result may be a type i error this false positive is the incorrect rejection of the null hypothesis even when it is true | |
what is a type ii error | a type ii error is a statistical term used within the context of hypothesis testing that describes the error that occurs when one fails to reject a null hypothesis that is actually false a type ii error produces a false negative also known as an error of omission for example a test for a disease may report a negative result when the patient is infected this is a type ii error because we accept the conclusion of the test as negative even though it is incorrect a type ii error can be contrasted with a type i error where researchers incorrectly reject a true null hypothesis a type ii error happens when one fails to reject a null hypothesis that is actually false a type i error produces a false positive understanding a type ii errora type ii error also known as an error of the second kind or a beta error confirms an idea that should have been rejected for instance claiming that two observances are the same despite them being different a type ii error does not reject the null hypothesis even though the alternative hypothesis is actually correct in other words a false finding is accepted as true the likelihood of a type ii error can be reduced by making more stringent criteria for rejecting a null hypothesis h0 for example if an analyst is considering anything that falls within the bounds of a 95 confidence interval as statistically insignificant a negative result then by decreasing that tolerance to 90 and subsequently narrowing the bounds you will get fewer negative results and thus reduce the chances of a false negative taking these steps however tends to increase the chances of encountering a type i error a false positive result when conducting a hypothesis test the probability or risk of making a type i error or type ii error should be considered the steps taken to reduce the chances of encountering a type ii error tend to increase the probability of a type i error type i errors vs type ii errorsthe difference between a type ii error and a type i error is that a type i error rejects the null hypothesis when it is true i e a false positive the probability of committing a type i error is equal to the level of significance that was set for the hypothesis test therefore if the level of significance is 0 05 there is a 5 chance that a type i error may occur the probability of committing a type ii error is equal to one minus the power of the test also known as beta the power of the test could be increased by increasing the sample size which decreases the risk of committing a type ii error some statistical literature will include overall significance level and type ii error risk as part of the report s analysis for example a 2021 meta analysis of exosome in the treatment of spinal cord injury recorded an overall significance level of 0 05 and a type ii error risk of 0 1 1example of a type ii errorassume a biotechnology company wants to compare how effective two of its drugs are for treating diabetes the null hypothesis states the two medications are equally effective a null hypothesis h0 is the claim that the company hopes to reject using the one tailed test the alternative hypothesis ha states that the two drugs are not equally effective the alternative hypothesis ha is the state of nature that is supported by rejecting the null hypothesis the biotech company implements a large clinical trial of 3 000 patients with diabetes to compare the treatments the company randomly divides the 3 000 patients into two equally sized groups giving one group one of the treatments and the other group the other treatment it selects a significance level of 0 05 which indicates it is willing to accept a 5 chance it may reject the null hypothesis when it is true or a 5 chance of committing a type i error assume the beta is calculated to be 0 025 or 2 5 therefore the probability of committing a type ii error is 97 5 if the two medications are not equal the null hypothesis should be rejected however if the biotech company does not reject the null hypothesis when the drugs are not equally effective then a type ii error occurs | |
what is the difference between type i and type ii errors | a type i error occurs if a null hypothesis is rejected that is actually true in the population this type of error is representative of a false positive alternatively a type ii error occurs if a null hypothesis is not rejected that is actually false in the population this type of error is representative of a false negative | |
what causes type ii errors | a type ii error is commonly caused if the statistical power of a test is too low the higher the statistical power the greater the chance of avoiding an error it s often recommended that the statistical power should be set to at least 80 prior to conducting any testing | |
what factors influence the magnitude of risk for type ii errors | as the sample size of a study increases the risk of type ii errors should decrease as the true population effect size increases the probability of a type ii error should also decrease finally the preset alpha level set by the research influences the magnitude of risk as the alpha level set decreases the risk of a type ii error increases | |
how can a type ii error be minimized | it is not possible to fully prevent committing a type ii error but the risk can be minimized by increasing the sample size however doing so will also increase the risk of committing a type i error instead the bottom linein statistics a type ii error results in a false negative meaning that there is a finding but it has been missed in the analysis or that the null hypothesis is not rejected when it ought to have been a type ii error can occur if there is not enough power in statistical tests often resulting from sample sizes that are too small increasing the sample size can help reduce the chances of committing a type ii error type ii errors can be contrasted with type i errors which are false positives | |
what is tzero | tzero group inc is a registered broker dealer that uses blockchain technology to securitize interest in companies searching for private equity it also offers trading and investing services the company was originally created as a cryptocurrency exchange to provide a trading platform for the security tokens of companies seeking funding and to bring greater legitimacy and oversight to initial coin offerings icos tzero spun out from overstock in 2021 and the crypto exchange shut down its services in march 2023 the company has changed its business model to one that provides private equity blockchain and security token services for companies seeking capital from private equity accredited and retail investors 123tzero historytzero grew from an earlier effort by overstock com an online retailer to develop a blockchain technology called medici medici was designed to allow overstock as well as other businesses that licensed the technology to sell cryptocurrencies this effort began in 2014 but was abandoned in 2018 4the company began selling simple agreements for future equity safes a convertible financial instrument to accredited investors in december 2017 safes allow companies to raise capital outside of traditional debt and equity markets and provide investors with some features of convertible notes according to its initial filing with the sec tzero expected to raise 250 million 5tzero created a cryptocurrency exchange that allowed securitized tokens to be traded it filed with and was approved by the securities and exchange commission to be an alternative trading system ats an ats is an authorized and regulated exchange that matches buy and sell orders via a computerized system companies could use its blockchain and trading platform to raise funds and investors could use it to find trading and investing opportunities after experiencing regulatory issues tzero changed its business model to become a democratized private equity facilitator between businesses seeking funding and investors in march 2023 tzero shut down its cryptocurrency exchange 1one of the key issues faced by startups is sourcing funds many turn to venture capital and private equity firms for funding the private equity market is full of large firms and wealthy individuals that specialize in funding startups so the issues that arise are numerous one concern is the centralization of capital where businesses that don t meet the criteria of these specific investors fail to get the funding they need another is that smaller private equity investors are crowded out of good deals because the more prominent investors take all the opportunities smaller private firms began to pool their resources to become more attractive to companies looking for funding creating the idea of democratized private equity alongside the ability to compete with the bigger investors tzero created a system and blockchain to address these issues the idea behind tzero s blockchain and system is to securitize interest in startups or other companies working to find capital and offer them on a platform so that anyone could invest these companies would then gain access to pooled capital through security tokens increasing their chances of getting funding without worrying about the sometimes stringent requirements venture capitalists and others ask for most notably the right to sit on a board and make decisions tzero offers tokenization services for startups or other businesses and operates a digital security trading platform for individual and accredited investors this combination of blockchain and trading services provides the link between the intended investing audience and companies looking for funding the future of tzerotzero s services appeal to investors who want access to early stage businesses or businesses seeking private funding these investors and firms have trouble breaking into the market because it is cornered by investors and institutions with vast amounts of capital and influence gaining access to private funding is essential for growing businesses but not all businesses appeal to some large venture capital firms groups of smaller investors have been pooling their funds and working to bring awareness of their efforts to capital seeking businesses tzero s model makes it easier for businesses and investors to connect circumventing the centralized private equity system that has developed it remains to be seen how tzero will turn out but it is filling a much needed gap in the private equity space with its trading platform and tokenization services | |
what blockchain is tzero on | tzero offers companies a choice of the blockchain they wish to be tokenized on the blockchains to choose from are ethereum tezos algorand and others 6 | |
is tzero owned by overstock | tzero spun out from overstock in 2018 it is now part of a parent company tzero group inc 7can you invest in tzero tzero is a broker that offers blockchain and trading services that allow you to invest in other companies its parent company tzero group inc is traded in the over the counter markets 8the bottom linetzero is a blockchain services company with a trading platform that brings investors and companies of all types and worth together you can use its services to offer digital shares of your company through a blockchain or invest in and trade digital securities using its platform | |
what is the u 6 unemployment rate | the u 6 unemployment rate measures the percentage of the u s labor force that is unemployed plus those who are underemployed marginally attached to the workforce and have given up looking for work the u 6 rate is considered by many economists to be the most revealing measure of the true state of the nation s employment situation nevertheless the more widely reported unemployment number is the u 3 often referred to simply as the unemployment report the u3 reveals only the number of people who are out of work and have sought work in the past four weeks both numbers are published by the bureau of labor statistics bls 1understanding the u 6 unemployment ratethe official unemployment rate used by the u s government and published by the bureau of labor statistics bls is the u 3 rate this is the percentage of the total labor force that is unemployed and has actively sought employment within the past four weeks 2the portion of the unemployed that has not looked for a job in the past four weeks is defined as marginally attached and no longer counted as unemployed that marginally attached group includes unemployed people who have unsuccessfully looked for work sometime in the past twelve months it also includes people who have returned to school or become disabled in which case they may or may not return to the labor force at some point the u 6 rate on the other hand factors in this marginally attached percentage of the labor force in its unemployment calculation the u 6 rate also includes the underemployed in its metrics these are people who want full time jobs but have settled for part time jobs due to economic conditions while the u 3 rate considers this category of workers to be employed the u 6 counts this group as unemployed finally the u 6 rate includes the discouraged those who want a job but have given up looking the bls publishes six monthly unemployment numbers the u 3 is the official rate and is most widely quoted the u 6 is a more comprehensive look at the state of american workers 2factors of the u 6 unemployment rategallup the data analytics firm considers the u 6 rate to be the real unemployment rate and maintains that the widely quoted u 3 rate does not accurately represent the reality of joblessness in america 3gallup notes that an engineer or any other skilled professional who takes a low paying part time job to survive would not be counted in the official unemployment rate even if they make as little as 20 a week in addition the u 3 rate does not include any workers who are employed but have had their work hours reduced all of the above are termed underemployed and are included in the u 6 rate the u 3 also omits those who are unemployed but have not looked for work in the past four weeks these are the discouraged workers that the u 6 reflects the st louis fed fred tracks the u 6 rate over time on its website its chart based on bls numbers shows a startling u 6 rate of 22 9 in april 2020 during the first national covid 19 shutdown the official u 3 rate at that time was 14 7 4 in january 2020 the u 6 rate had been just 6 9 the official u 3 rate was 3 5 56example of the u 6 unemployment rateto calculate the official unemployment rate the u 3 the bls divides the total number of unemployed people by the total number of labor force participants then multiplies that number by 100 for example the june 2019 monthly rate report indicated that the total number of people that were unemployed was 6 0 million and the civilian labor force consisted of 163 0 million people the u 3 unemployment rate was 3 7 seasonally adjusted 7in the same january 2022 report the number of people that were marginally attached to the labor force totaled 1 5 million while the total number of workers with part time jobs for economic reasons was 3 7 million the u 6 unemployment rate was 7 1 seasonally adjusted 8 | |
when calculating the u 6 rate the marginally attached group is added to both the numerator total unemployed and denominator total labor force in addition part time workers are added to the numerator only since they have already been included as part of the labor force | the u 6 rate is considerably higher than the u 3 figure and is arguably a better reflection of the health of the american workforce at the time the unemployment rates are not based on the numbers of people who have applied for unemployment they are based on a survey of households in every region of the u s since march 2020 the bureau of labor statistics has added several questions to its household survey in order to measure the impact of the coronavirus pandemic on jobs here s some of what it found in january 2022 | |
how is the u 6 unemployment rate calculated | the unemployment statistics released early each month by the bureau of labor statistics are based on a survey of 60 000 households that s a total of about 110 000 individuals in about 2 000 geographic areas urban and rural 9 the survey is conducted by census bureau employees the calculation is straightforward | |
what is a u shaped recovery | a u shaped recovery is a type of economic recession and recovery that resembles a u shape when charted a u shaped recovery represents the shape of the chart of certain economic measures such as employment gross domestic product gdp and industrial output the u shape occurs when the economy experiences a sharp decline in these metrics without a clearly defined trough but instead a period of stagnation followed by a relatively healthy rise back to its previous peak a u shaped recovery is similar to a v shaped recovery except that the economy spends a longer time slogging along the bottom of the recession rather than immediately rebounding understanding u shaped recoverya u shaped recovery describes a type of economic recession and recovery that charts a u shape established when certain metrics such as employment gdp and industrial output sharply decline and then remain depressed typically over a period of 12 to 24 months before they bounce back again a u shaped rescission features a steep decline in economic output followed by a relatively longer trough than a v shaped recession followed by a longer recovery out of that trough the downturn here is usually deeper and longer than that of a v shaped recession in the early stages of a u shape economists may wrongly assume that the worst is over and the economy has bottomed out however the longer it takes to recover the more likely the setback will be more severe than originally anticipated as the recession drags on companies experience more trouble in paying their bills and some may have to declare bankruptcy during the recovery period banks are typically reluctant to lend more money to firms and consumers do not spend freely until they see signs that the economy is recovering once again increasing consumer confidence although spending is a key driver of the economy it takes time for consumers to feel comfortable again about spending their money businesses must wait for the economic climate to improve before bringing on additional workers with fewer jobs available unemployment tends to increase during such recovery periods meanwhile a v shaped recovery may reach the same trough but quickly rebound in a matter of weeks or a few months rather than dragging out for a year or more other common recession shapesrecession shapes are shorthand concepts used by economists to characterize various types of recessions any number of recession and recovery types may conceivably be charted although the most common shapes include u shaped v shaped w shaped and l shaped examples of u shaped recessionsof the u s recessions charted since 1945 approximately half have been described by economists as u shaped including the 1973 75 recession and the 1990 91 recession one of the most notable u shaped recessions in u s history was the 1973 75 recession the economy began to shrink in early 1973 and continued to decline or show only slight growth over the next two years with the gdp dipping 3 at its deepest point before finally recovering in 1975 1the roots of this recession lay in the inflationary policies of the preceding years simultaneously financing the vietnam war and the great society welfare state expansion under president lyndon johnson keynesian deficit spending policies under president richard nixon after him and the resulting break of the last links between the u s dollar and gold the onset of the recession was marked by the recovery was marked by persistently high unemployment and accelerating inflation which would characterize the 1970s as the era of stagflation the deregulation of banks and savings loans s l in the early 1980s kicked off a boom in commercial and residential real estate lending that really took off as the federal reserve loosened monetary policy and interest rates fell after the economy emerged from recession in 1982 this boom would build into a debt bubble of risky mortgages and shady banking practices that burst in the late 1980s in a debacle known as the s l crisis the resulting massive losses debt deflation and bank failures across the real estate and financial sector led to recession for the broader economy in mid 1990 although mild gdp growth reappeared the following year job losses continued and unemployment rose through mid 1992 and total employment did not regain its pre recession level until 1993 2 because of this the recovery from the 1990 91 recession has been dubbed the jobless recovery and it can be considered an example of a u shaped recovery was the covid recession u shaped many economists have characterized the economic downturn and recovery following the onset of the covid 19 pandemic from 2020 to 2021 as k shaped whereby certain industries suffered such as travel and hospitality while others saw positive growth such as internet communications and online streaming 3 | |
how is a u shaped recession different from a v shaped recession | both a u and v shaped recession features a sharp decline followed by a somewhat symmetrical recovery the main difference is in how long the economy remains depressed at its trough a v shape remains there for only a short period with a quick rebound while a u shape may remain there for far longer before eventually recovering | |
how long do recessions usually last | since 1857 the united states has had 34 recessions ranging in length from two months february to april 2020 to more than five years october 1873 to march 1879 in the six instances since 1980 the average recession lasted less than 10 months 4the bottom linea u shaped recession and recovery is characterized by an initial drop in economic output followed by an extended period of decline and then a slower but eventual economic expansion in the case of a u shape it is sometimes hard to tell if the economy has bottomed out or if things will get worse before they get better economists tend to categorize u shapes into three stages the recessionary part of the downturn the economic trough and the slower but more lasting economic recovery | |
what is an uberrimae fidei contract | an uberrimae fidei contract is a legal agreement common to the insurance industry requiring the highest standard of good faith during the disclosure of all material facts that could influence the decision of the other party a failure to adhere to uberrimae fidei is grounds for voiding the agreement uberrimae fidei is also known as utmost good faith and is simply the latin translation of this phrase understanding uberrimae fidei contractsuberrimae fidei or uberrima fides literally means utmost good faith in latin it requires parties to certain contracts to exercise the highest standard of full disclosure of any relevant conditions circumstances or risks to their counterparties failing to disclose material facts that might influence the other party s decision when entering into a contract where uberrimae fidei applies can result in the contract being rendered null and void and the other party being released from any obligations under the contract uberrimae fidei in insurance contractsinsurance contracts are the most common type of uberrimae fidei contracts since the insurance company agrees to share the risk of loss with the policyholder it is imperative that the policyholder act in good faith by fully disclosing all information that affects the insurance company s level of risk full disclosure allows the insurer to protect itself by charging the policyholder a premium that accurately reflects the level of risk it is undertaking or even refusing to issue a policy if the risk is too high standards of disclosure in legal contracts such as uberrimae fidei are attempts to resolve economic problems that arise from information asymmetry particularly in the case of insurance contracts the principle of uberrimae fidei is meant to protect the insurer against the problem of adverse selection because it is common for the insurance applicant to have more information about their own characteristics and past behavior with respect to risk that is being insured against than the insurer does the potential insured has an obvious incentive to withhold information from the insurer about existing circumstances or past risky behavior that would tend to lead the insurer to demand a higher premium payment or refuse to insure at all uberrimae fidei requires that they disclose this information before they can be insured for example someone applying for life insurance knows more about their eating habits exercise patterns risky behaviors family medical history and personal medical history than the potential insurer does in order to determine how risky the applicant is the insurer requires them to honestly answer a medical questionnaire and submit to a review of medical records before being approved for a policy if the policyholder is later found to not have acted in utmost good faith at the time of application the policy and benefits can be rescinded special considerationsuberrimae fidei is seen as the foundation of a reinsurance contract in order to make reinsurance affordable a reinsurer cannot duplicate costly processes such as insurer underwriting and claim handling costs they must rely on the primary insurer s ability to complete these tasks adequately in return a reinsurer must appropriately investigate and reimburse an insurer s good faith claim payments uberrimae fidei is considered an implied term in reinsurance contracts origin of uberrimae fideithe principles of uberrimae fidei were first expressed by britain s lord mansfield in the case of carter v boehm 1766 1mansfield said | |
what is an example of a breach of utmost good faith | an example of a breach of utmost good faith is any time one party in a contract does not disclose all material information information that would otherwise change the nature of the contract for example if you are applying for health insurance and do not disclose that you are a regular smoker which would increase the risk for the insurance company this is a breach of utmost good faith | |
what is the difference between caveat emptor and uberrimae fidei | uberrimae fidei and caveat emptor are two completely opposing principles two sides of the coin while uberrimae fidei implies utmost good faith where both parties disclose all information caveat emptor implies buyer beware where all material information is not disclosed and the risk is unknown to the buyer who is solely responsible for uncovering any risks | |
what is the major reason for a breach of utmost good faith | reasons for breaches of utmost good faith include withholding relevant information and lying both of which would void a contract of utmost good faith the bottom lineprevalent in the insurance industry an uberrimae fidei contract requires the disclosure of all material information in good faith which if not done is grounds for termination of the contract uberrimae fidei contracts are particularly important in reinsurance which is when an insurance company transfers some of its risk to a reinsurance company | |
what is ubs | ubs formerly known as the union bank of switzerland is a multinational diversified financial services company headquartered in zurich and basel ubs is involved in virtually all major financial activities including retail and commercial banking investment banking investment management and wealth management ubs has a major presence around the globe and in the united states it has its american headquarters in new york city it operates in over 50 countries worldwide with close to 60 000 employees ubs explainedthe name ubs is derived from one of its predecessor corporations the union bank of switzerland the current ubs originated when the union bank of switzerland merged with the swiss bank corporation in 1998 thus ubs is now used as the company s official name and not as an acronym the ubs logo consists of three keys a symbol taken from the swiss bank corporation the keys symbolize confidence security and discretion ubs s major divisionsubs has several major divisions offering products and services to numerous clients these divisions include wealth management asset management investment banking and retail banking ubs wealth management covers both high net worth and ultra high net worth individuals the division s financial advisors work with clients to understand the breadth of their financial and other assets and develop tailored solutions to meet their needs financial advisors may specialize in services such as investment management income tax preparation or estate planning the investment aim of ubs asset management is to deliver superior investment performance and client service asset management differs from wealth management in that it can also describe managing collective investments such as a pension fund in addition to overseeing individual assets for this reason some deem asset management to encompass wealth management ubs has more than chf 2 8 trillion in invested assets in 2022 and is the largest bank in switzerland 1ubs investment bank is considered one of the bulge bracket banks along with goldman sachs j p morgan morgan stanley citigroup barclays bank of america merrill lynch credit suisse and deutsche bank investment banks underwrite new debt and equity securities for all types of corporations aid in the sale of these securities and help to facilitate mergers and acquisitions reorganizations and broker trades for institutions and private investors at times investment banks also provide guidance to issuers regarding the issue and placement of stock ubs retail banking is what many traditionally view as mass market banking wherein individual customers use the local branches of larger commercial banks other examples of retail banks include citibank and t d bank ubs retail bank offers savings and checking accounts mortgages personal loans debit or credit cards and certificates of deposit cds the focus is on the individual consumer | |
what does ubs stand for | ubs is the acronym for union bank of switzerland union de banques suisses or unione di banche svizzere in french or italian respectively in german it s schweizerische bankgesellschaft when union bank merged with swiss bank the new entity took on the name ubs | |
is ubs a us bank | while ubs is based in switzerland it also operates as a licensed u s bank headquartered in new york city and registered in utah known as ubs bank usa | |
what does ubs wealth management do | ubs wealth management provides a range of financial planning services for individuals and businesses these include portfolio management market research retirement planning and educational planning the bottom lineubs is a swiss investment bank with global operations it operates in more than 50 countries worldwide with close to 60 000 employees its primary divisions include investment and retail banking and asset and wealth management this financial institution has a major presence in the united states including at its american headquarters in new york city the main divisions of ubs include investment retail banking and asset wealth management | |
what is a ucc 1 statement | a ucc uniform commercial code 1 statement is a legal notice filed by creditors to publicly declare their rights to potentially obtain the personal properties of debtors who default on business loans they extend often abbreviated as ucc 1 these notices are typically printed in local newspapers to alert the masses of the creditors intentions ucc 1s are required for all business loans under the uniform commercial code ucc and establish a relative priority over which specific assets may be seized and in what order while solidifying the collection pecking order in cases where there are multiple lenders to the same debtor understanding ucc 1 statementsthe ucc 1 statement serves as a lien on secured collateral where the components and filing procedures are comparable to the lien requirements in residential mortgage loan contracts the ucc 1 statement is a directive of the uniform commercial code ucc which governs business deals and activities in the united states according to the ninth article of the ucc titled secured transactions a lender must incorporate completed ucc 1 statements in a business loan s contract for it to be deemed effective the statements must include detailed information about the borrower and they must itemize descriptions of all assets named as the secured collateral for the loan while virtually any type of asset may serve as such collateral the most commonly used items include real estate properties motor vehicles manufacturing equipment inventory and investment securities such as stock and bond holdings as with any ordinary lien lenders must perfect the ucc 1 statement by filing it with the appropriate agency in the state where the debtor company is incorporated in most cases ucc 1 statements are filed with the secretary of state s office which subsequently time stamps the document and assigns a file number to the associated parties in industry jargon the process of issuing ucc 1 notices is referred to as perfecting the security interest in the debtor s property types of ucc 1 statementslenders have the option of filing the following two types of ucc 1 statements |
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