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what are the drawbacks of the gordon growth model | the ggm s main limitation lies in its assumption of constant growth in dividends per share it is very rare for companies to show constant growth in their dividends due to business cycles and unexpected financial difficulties or successes the model is thus limited to companies with stable growth rates in dividends per share another issue occurs with the relationship between the discount factor and the growth rate used in the model if the required rate of return is less than the growth rate of dividends per share the result is a negative value rendering the model worthless also if the required rate of return is the same as the growth rate the value per share approaches infinity 1the bottom linethe gordon growth model is a popular formula that s used to find the intrinsic value of a company s stock generally when the model s calculation results in a figure that s higher than the current market price of a company s shares the stock is seen as undervalued and should be considered a buy when the ggm result is lower than the current trading price the stock is seen as overvalued and should be considered a sell a downside of the gordon growth model is its assumption that dividend payouts grow at a constant rate this makes it useful only when considering the stock of those select companies with dividends that match that assumption in addition should the formula s required rate of return be less than the dividend growth rate the result will be negative and of no value | |
what is governance risk management and compliance grc | governance risk management and compliance grc is a relatively new corporate management system that integrates these three crucial functions into the processes of every department within an organization grc is in part a response to the silo mentality as it has become disparagingly known that is each department within a company can become reluctant to share information or resources with any other department this is seen as reducing efficiency damaging morale and preventing the development of a positive company culture understanding grcgovernance risk management and compliance have been key elements of company management for a long time but the concept of grc has been around only since about 2007 the overall purpose of grc is to reduce risks and costs as well as duplication of effort it is a strategy that requires company wide cooperation to achieve results that meet internal guidelines and processes established for each of the three key functions the three elements of grc are an entire industry has emerged to provide companies with the consulting services necessary to implement a grc system grc proponents argue that increased regulation demands for transparency and the growth of third party relationships make the traditional siloed approach too risky grc software is also available some highly regarded software packages according to cio com include the ibm openpage grc platform metricstream and rsam s enterprise grc the article notes that more affordable and even free grc software is available though with fewer features advantages of grcits proponents argue that increasing government regulation greater demands for corporate transparency and the growth of third party business relationships have made the traditional siloed approach to these activities risky and expensive instead grc focuses on integrating certain key capabilities and functions across an organization these capabilities and functions may include information technology human resources finance and performance management among many others as an integrated approach grc can mean different things to different businesses however it generally requires each department within a business to gather share and use information and internal resources more efficiently for the company as a whole | |
what is the government accountability office gao | the government accountability office gao is an independent and legislative agency that monitors and audits government spending and operations the agency examines how taxpayer dollars are spent and provides recommendations on how to save the government money or operate more fiscally responsibly established in 1921 gao is also often called the congressional watchdog it is a non partisan agency that helps the government find efficiencies in spending which is why it is said to work for congress understanding the government accountability office gao the government accountability office is an independent government agency that is tasked with tracking the use of taxpayer dollars by the legislative and executive branches of government and providing the results directly to congress put simply gao serves as a congressional watchdog over government spending it monitors the operating results financial positions and accounting systems used by the various governmental agencies and conducts routine audits on all branches of government the primary goals and objectives of gao are to another set of legislative duties includes establishing standards or the yellow book also referred to as the generally accepted government auditing standards these principles are used to streamline the process during government audits and providing reports the agency is run by the comptroller general who serves a 15 year term the position is appointed by the president from a bipartisan list of congressional recommendations gene l dodaro was appointed as acting comptroller general in 2008 when david walker resigned dodaro was officially confirmed by the senate for his 15 year term in 2010 special considerationsthe gao has broad authority to review the function and operations of the federal reserve the central bank of the united states as such it conducts reviews of the emergency lending programs that were enacted following the collapse of the housing market and the 2007 2008 financial crisis which led to the great recession despite this it does not have the authority to review individual meetings and monetary policy decisions made by the fed as of may 2021 five out of eight priority recommendations made by the government accountability office were implemented by the federal reserve history of the government accountability office gao u s government spending and debt rose sharply during world war i this reality prompted demand for a formal system to review monitor and control government expenditures as a result the budget and accounting act of 1921 established the general accounting office which assumed budget accounting and auditing responsibilities from the u s treasury the act also required the president to prepare an annual budget for the federal government in 2004 the agency s name was changed to the government accountability office after the passing of the gao human capital reform act government programs and expenditures expanded sharply in the 1930s as a result of president roosevelt s new deal social policies which were created in response to the great depression the gao s role which originally focused on ensuring payments were made properly grew in importance by 1945 at the end of world war ii government spending again soared and the gao began auditing government agencies to ensure they operated according to their purpose by the 1970s the gao s work expanded to include reviews of agency work on consumer protection the environment and social welfare agency personnel consisted of only accountants but that soon expanded to include scientists care professionals and computer scientists the agency continues to evaluate government spending programs including how it appropriated funds related to the covid 19 pandemic which amounted to 4 8 trillion | |
what is the governmental accounting standards board gasb | the governmental accounting standards board gasb is a private non governmental organization that creates accounting reporting standards or generally accepted accounting principles gaap for state and local governments in the united states understanding the governmental accounting standards board gasb the governmental accounting standards board gasb is an independent non political organization founded in 1984 the board s mission is to promote clear consistent transparent and comparable financial reporting for state and local governments the federal accounting standards board fasb does the same for the federal government taxpayers holders of municipal bonds legislators and oversight bodies rely on this financial information to shape public policy and to invest 1gasb s functionsthe gasb uses an open and independent process that encourages broad participation from all stakeholders it objectively considers and analyzes all their views gasb issued an invitation to comment for public feedback in june 2022 that provided users of government financial statements with critical information about vulnerabilities for risk and disclosure for state and local governments the gasb is led by a seven member board headed by a chair and a vice chair the faf board of trustees appoints board members for five year terms and members serve for up to 10 years the chair serves on the board full time while the vice chair and the remaining five members serve part time gasb members are qualified in governmental accounting and finance and are concerned with public interests in the nation s accounting and financial reporting 1the gasb is subject to oversight by the financial accounting foundation faf board of trustees which selects its board members and by the fasb it funds both the gasb is primarily funded by accounting support fees paid by brokers and dealers who trade in municipal bonds this funding mechanism was established by section 978 of the dodd frank wall street reform and consumer protection act of 2010 23according to the gasb s website the collective mission of the gasb the fasb and the faf is to establish and improve financial accounting and reporting standards to provide useful information to investors and other users of financial reports and educate stakeholders on how to most effectively understand and implement those standards 1the gasb relies on a variety of intelligence sources when setting its policies the gasb convenes consultative groups and task forces to ensure that diverse opinions are considered consultative groups perform research for agenda items concerning accounting and financial reporting standards task forces are formed to conduct the board s technical projects both groups are important sounding boards to ensure that the gasb makes the best decisions for the taxpayer finance and business communities | |
what does generally accepted accounting principles gaap accomplish | gaap monitors and confirms the information that s provided to consumers and investors by public companies it adds a measure of trust to transactions so consumers and investors are more comfortable parting with their dollars public companies must adhere to 10 principles and abide by gaap standards 4who are the gasb members joel black serves as chair and jeffrey j previdi serves as vice chair black is classified in public accounting and previdi is classified as a financial statement user the gasb states that each member brings a unique perspective to the board through different work experiences and areas of expertise 1 | |
what are municipal bonds | municipal bonds are debt securities they re offered by governments to raise funds to pay for their day to day operations and major projects such as building infrastructure and schools the money is returned to the purchaser at the bond s maturity date and interest is paid regularly during the period of ownership many of these governments follow gaap but some use other methods of accounting the bottom linethe governmental accounting standards board gasb creates and maintains standards for accounting by state and local governments through the implementation of the generally accepted accounting principles gaap this provides investors consumers and legislators with a level of confidence that the financial reporting of applicable companies is true transparent and reliable correction may 4 2024 a previous version of this article referred to the gasb as the government accounting standards board it s been revised to cite the correct name which is the governmental accounting standards board | |
what is a government bond | a government bond is a debt security issued by a government to support government spending and obligations government bonds can pay periodic interest payments called coupon payments government bonds issued by national governments are often considered low risk investments since the issuing government backs them government bonds issued by a federal government may also be known as sovereign debt investopedia nono floresgovernment bonds explainedgovernment bonds are issued by governments to raise money to finance projects or day to day operations 1 the u s treasury department sells the issued bonds during auctions at regular intervals throughout the year 2 only certain registered participants often large banks can buy u s government bonds directly at auction 3 when the government holds a bond auction each buyer submits its purchase bid and the auction continues until all the bonds are duly distributed 4some treasury bonds trade in the secondary market individual investors working with a financial institution or broker can buy and sell previously issued bonds through this marketplace treasuries are widely available for purchase through the u s treasury brokers and exchange traded funds etfs which contain a basket of securities 5fixed rate government bonds can have interest rate risk which occurs when interest rates are rising and investors are holding lower paying fixed rate bonds as compared to the market also only select bonds keep up with inflation which is a measure of price increases throughout the economy if a fixed rate government bond pays 2 per year for example and prices in the economy rise by 1 5 the investor is earning only 0 5 in real terms municipal government bondslocal governments may also issue bonds to fund projects such as infrastructure libraries or parks these are known as municipal bonds or munis and often carry certain tax advantages and exemptions for investors 1munis can be thought of as loans that investors make to local governments and they are used to fund public works such as parks libraries bridges and roads and other infrastructure they may be funded via local tax dollars or by revenue generated from the project e g a toll road 6although municipal bonds may have lower interest rates than riskier investments like corporate bonds or stocks they offer some stability and low default rates if you are interested in government bonds you may want to acquaint yourself with the following terms the u s vs foreign government bondsu s treasuries are nearly as close to risk free as an investment can get this low risk profile is because the issuing government backs the bonds government bonds from the u s treasury are some of the most secure worldwide while those floated by other countries may carry a greater degree of risk 5due to this nearly risk free nature market participants and analysts use treasuries as a benchmark in comparing the risk associated with securities the 10 year treasury bond is also used as a benchmark and guide for interest rates on lending products due to their low risk u s treasuries tend to offer lower rates of return relative to equities and corporate bonds however government backed bonds particularly those in emerging markets can carry risks that include country risk political risk and central bank risk including whether the banking system is solvent investors saw a bleak reminder of how risky some government bonds can be during the asian financial crisis of 1997 and 1998 7 during this crisis several asian nations were forced to devalue their currency which sent reverberations around the globe the crisis even caused russia to default on its debt the uses of government bondsgovernment bonds assist in funding deficits in the federal budget and are used to raise capital for various projects such as infrastructure spending however government bonds are also used by the federal reserve bank to control the nation s money supply | |
when the federal reserve repurchases u s government bonds the money supply increases throughout the economy as sellers receive funds to spend or invest in the market any funds deposited into banks are in turn used by those financial institutions to loan to companies and individuals further boosting economic activity | pros and cons of government bondsas with all investments government bonds provide both benefits and disadvantages to the bondholder on the upside these debt securities tend to return a steady stream of interest income however this return is usually lower than other products on the market due to the reduced level of risk involved in their investments the market for u s government bonds is very liquid allowing the holder to resell them on the secondary bond market easily there are even etfs and mutual funds that focus their investment on treasury bonds fixed rate bonds may fall behind during periods of increasing inflation or rising market interest rates also foreign bonds are exposed to sovereign or governmental risk changes in currency rates and have a higher risk of default some u s treasury bonds are free of state and federal taxes however the investor of foreign bonds may face taxes on income from these foreign investments pay a steady interest income returnlow risk of default for u s bondsexempt from state and local taxesa liquid market for resellingassessable through mutual funds and etfsoffer low rates of returnfixed income falls behind with rising inflationcarry risk when market interest rates increasedefault and other risks on foreign bondsexamples of u s government bondsthere are various types of bonds offered by the u s treasury that have various maturities in addition some bonds return regular interest payments while some do not in the u s the national debt refers largely to the notional value of outstanding government bonds the largest portion of the national debt approximately 27 trillion is held by the public intragovernmental holdings make up approximately 7 1 trillion for a total debt of approximately 34 7 trillion as of q2 2024 8the u s treasury offers series ee bonds and series i savings bonds bonds sell at face value and have a fixed rate of interest bonds held for 20 years will reach their face value and effectively double series i bonds receive a semi annually calculated secondary rate tied to an inflation rate 9treasury notes t notes are intermediate term bonds maturing in two three five or 10 years that provide fixed coupon returns t notes typically have a 1 000 face value however two or three year maturities have a 5 000 face value 10treasury bonds t bonds are long term bonds having a maturity between 10 to 30 years t bonds give interest or coupon payments semi annually and have 1 000 face values 11 the bonds help to offset shortfalls in the federal budget also they help to regulate the nation s money supply and execute u s monetary policy treasury inflation protected securities tips are a treasury security indexed to inflation they protect investors from the adverse effects of rising prices the par value principal increases with inflation and decreases with deflation following the consumer price index cpi 12tips pay a fixed rate of interest determined on the bond s auction on a six months basis however interest payment amounts vary since the rate applies to the adjusted principal value of the bond tips have maturities of five 10 and 30 years 12 on nov 19 2020 the 10 year tips bond was auctioned with an interest rate of 0 867 if you buy government bonds and hold them until maturity you will enjoy regular coupon interest payments and a return of your initial investment when they mature during that time however the price of a government bond will fluctuate in the market bond prices have an inverse relationship with interest rates so when interest rates go up government bond prices go down in the secondary market because of this shorter term investors who do not buy and hold bonds until maturity can experience gains or losses in the market bond traders can also look to profit from the relative differences in the yields of certain bonds known as the spread for instance the spread between u s treasuries and highly rated corporate bonds another bond trading strategy is to bet on changes in the spread between different maturities known as the yield curve government bonds can provide a combination of considerable safety and relatively high returns however investors need to be aware that governments sometimes lack the ability or willingness to pay back their debts | |
how do you buy government bonds | u s treasury securities are available to investors through their broker or bank or directly through the treasurydirect website investors can also look to etfs or mutual funds that invest in treasuries municipal bonds are available via your broker | |
why are interest rates on government bonds usually lower than other bonds | bonds issued by the federal government are considered to be essentially riskless in the u s the federal government has never defaulted on its debt and the government could theoretically create more money or raise taxes in order to pay for the interest on existing debts to avoid default therefore treasuries carry what is known as the risk free rate of return corporate and other bonds must carry higher yields to compensate investors for the additional credit risk that are inherent to them | |
what are u s government bond types | the u s government has a variety of different treasury securities available for purchase depending on what the investor is looking for the different offerings of the securities are treasury bills treasury notes treasury bonds treasury inflation protected securities tips floating rate notes frns series i savings bonds and series ee savings bonds 5 | |
what are example of non u s government bonds | foreign governments around the world issue debt in the form of bonds some of these commonly include the bottom linegovernment bonds issued by federal governments are among the safest investments around often carrying the risk free rate of return however because of their lower risk they also carry relatively lower yields in the u s federal bonds are known as treasuries which consist of short term t bills medium term t notes and long term t bonds foreign governments also regularly issue bonds state and local governments may also issue bonds in the form of municipal bonds munis these are attractive to some investors since they can offer certain tax exemptions | |
what is a government grant | a government grant is a financial award given by a federal state or local government authority for a beneficial project it is effectively a transfer payment a grant does not include technical assistance or other financial assistance such as a loan or loan guarantee an interest rate subsidy direct appropriation or revenue sharing 1 the grantee is not expected to repay the money but is expected to use the funds from the grant for their stated purpose which typically serves some larger good in certain cases there may also be revenue sharing agreements with the government for instance in the case of a discovery that leads to a profit generating patent twenty six federal agencies administer more than 1 000 grant programs annually to provide funding for the arts the sciences and educational institutions 23 government grants help fund ideas and projects providing public services and stimulating the economy 4 for example an economics program may be designed to strengthen empirical and theoretical economic analysis as well as the methods for rigorous research on economic behavior grants may also support critical recovery initiatives agricultural projects and innovative research in all sorts of fields | |
how a government grant works | government grants aren t just bestowed they must be applied for 6 getting a government grant is an extremely competitive process the paperwork is complex and applicants must describe how the awarded funds will benefit the local community or the public at large crafting a convincing proposal is so challenging that applicants often hire professional help some freelance writers specialize in writing grant proposals grants from the federal government are authorized and appropriated through bills passed by congress and signed by the president 7 grant authority varies among agencies for example the small business administration sba may distribute grants to nonprofit organizations in many of its counseling and training programs receiving a government grantgovernment grants have no hidden costs or fees they are outright gifts not loans however because government grants are funded by tax dollars they include stringent compliance and reporting measures to ensure the money is well spent 5after receiving a check the grantee must submit detailed reports accounting for how the money is disbursed if the funds are received in stages these reports must continue during the grant period any accomplishments or failures also must be documented and submitted to the sponsoring agency according to various deadlines 5receiving a government grant is a prestigious event a sign an individual or nonprofit organization has a significant positive impact on a community or in a field of study or industrial sector often it puts a project on the donor map attracting other providers of funding both nonprofit and profit it also might lend the grantee some influence with or attention from the sponsoring agency applying for a government grantgrants gov is a free online source for researching and applying for more than 1 000 federal grant programs with access to approximately 500 billion in awards annually 2 a grant proposal writer may register by completing a standard business profile on behalf of an individual a nonprofit organization a research institution or a similar entity the writer also submits an authorized organization representative application supplies an e business point of contact and completes a detailed application the writer then has access to finding federal grant opportunities applying for and tracking grants and receiving grant email alerts webinar schedules and tips from grantors 8government grants come with no strings and that includes the application process so if you are asked to submit a fee to apply or to learn more about a grant there s a good chance it is a scam 9example of a government grantthe performing arts is one popular category for many government agencies awarding grants for example in early 2019 the u s embassy s public affairs section in moscow sought grant applications to identify and select american artists and performers to bring to russia for short term programs in the fields of music dance theater film and television acting and culinary arts 10eligible applicants could include nonprofits small businesses and public or private universities grantees could receive up to 650 000 to produce performances in russia the goals of the grant included strengthening people to people ties between the u s and russia and showcasing american values by presenting the full range of american creativity and innovation 11 | |
what is the government national mortgage association | the government national mortgage association is a federal government corporation that guarantees the timely payment of principal and interest on mortgage backed securities mbss issued by approved lenders ginnie mae connects the united states housing market to capital markets providing low cost financing for federal housing programs through the federal housing administration fha veterans affairs va the department of agriculture and hud s public and indian housing 1 | |
what does ginnie mae do | the government national mortgage association was established in 1968 as part of the u s department of housing and urban development hud to promote affordable homeownership 2 ginnie mae does not create mortgages but guarantees them for single and multifamily homes since the government backs these loans homeowners can secure lower interest rates lowering their borrowing costs using a mortgage calculator is an excellent resource for budgeting these costs ginnie mae operates behind the mortgage market neither issuing selling or buying pass through mortgage backed securities nor purchasing mortgage loans instead approved private lenders originate eligible loans pool them into securities and issue mortgage backed securities guaranteed by ginnie mae in april 2023 ginnie mae s mbs portfolio balance was worth 2 4 trillion 3ginnie mae guarantees mortgage backed securities to help open the home mortgage market to first time homemakers low income borrowers and other underserved groups 2ginnie mae guaranteesginnie mae guarantees the timely payment of principal and interest from approved issuers such as mortgage bankers savings and loans and commercial banks of qualifying loans an investor in a gnma security doesn t know who the underlying issuer of the mortgages is but that the security is guaranteed by ginnie mae and backed by the full faith and credit of the u s government just like the instruments issued by the u s treasury 4the gnma guarantee means that investors with shares in ginnie mae funds never have to worry about the impact of late payments or mortgage defaults on their investment when mortgage borrowers fail to make payments ginnie mae covers them 5ginnie mae s efforts aid those traditionally underserved in the mortgage market most mortgages securitized as ginnie mae mbss are insured by the federal housing administration fha which typically insures mortgages to first time home buyers and low income borrowers 6history of ginnie maeafter the great depression when historically high unemployment rates led to unprecedented loan defaults congress passed the national housing act of 1934 a component of the new deal to help revive the u s housing market and protect lenders from mortgage default in 1968 thirty years after it was established the federal national mortgage association fnma better known as fannie mae split into two entities with two separate functions fannie mae would purchase conventional loans and ginnie mae government backed mortgages 7fannie mae was converted from a government sponsored enterprise gse to a publicly traded company ginnie mae was established as a gse and part of the department of housing and urban development or hud ginnie mae is the only home loan agency explicitly backed by the full faith and credit of the united states government ginnie mae vs fannie mae and freddie macseveral organizations are similar to ginnie mae notably freddie mac and fannie mae freddie mac and fannie mae are government sponsored enterprises gses federally chartered corporations owned by private shareholders 8 | |
where ginnie mae guarantees only securities that comprise mortgages guaranteed by federal agencies such as the fha and va its relatives may back securities whose mortgages are not insured by the government fannie mae has a portfolio that invests in its own and other institutions mortgage backed securities | the gnma is also ostensibly the only mae or mac backed by the full faith and credit of the federal government in 2008 during the housing crisis fannie mae and freddie mac were overseen by the government via a conservatorship of the federal housing finance committee 9 some argue that the bailout erased ginnie mae s distinction as the only federal agency guaranteeing mortgage securities that enjoy government protection against failure | |
does ginnie mae provide mortgage financing | ginnie mae does not originate any loans or provide financing for mortgage issuers the gnma doesn t provide insurance to lenders against any credit risks that stem from borrowers furthermore ginnie mae doesn t set any standards for loan issuers such as underwriting or credit standards | |
why are ginnie mae securities considered a safe investment | ginnie mae does not buy or sell loans or issue mortgage backed securities mbs and its balance sheet doesn t use derivatives to hedge or carry long term debt 4the bottom linethe government national mortgage association gnma or ginnie mae guarantees principal and interest payments on mortgage backed securities issued by approved lenders the gnma is backed by the full faith and credit of the federal government unlike fannie mae or freddie mac ginnie mae was established in 1968 to promote affordable homeownership | |
what is the government of singapore investment corporation gic | the government of singapore investment corporation gic is a government owned company assigned to manage singapore s sovereign wealth fund the fund is now officially named gic private limited the gic was formed in 1981 with the aim to invest the sovereign wealth fund more aggressively in higher yielding asset classes and over a longer investment horizon according to the sovereign wealth fund institute the gics controls the eighth largest sovereign wealth fund in the world with 390 billion in assets under management as of mid 2018 cite gic is one of the three reserves management entities in singapore alongside the monetary authority of singapore mas and temasek holdings understanding the gicthe government of singapore investment corporation gic manages funds on behalf of two clients the government of singapore and the monetary authority of singapore although the gic has the usual corporate structure it has two unique features due to its status as a fifth schedule corporation in singapore first the approval of the president of singapore is required to take certain actions such as the appointment and removal of directors and key managers second the financial statements of the gic are audited by the government of singapore s auditor general a number of the gic s directors and key officers are prominent current or former members of the government of singapore while others are independent directors appointed from the private sector similar to other sovereign wealth funds the fund s holdings include a range of financial assets most of the portfolio is managed internally with an estimated 80 of the fund driven by in house management historically the fund has maintained a low profile but was opportunistic as other sovereign wealth funds were during the 2007 2010 u s housing crises gic investment performancethe gic does not report exact fund details in its annual profit and loss disclosures if it revealed precise values the fund would unnecessarily expose the full size of singapore s financial reserves making it easier for speculators to speculate against the singapore dollar during periods of market and economic vulnerability however the fund does disclose certain five 10 and 20 year details highlighting performance and risk management metrics over the 20 year period that ended 31 march 2019 gic achieved an annualised rate of return of 3 4 above global inflation in other words the international purchasing power of the reserves nearly doubled during the 20 year period santiago principlesin 2008 gic participated in the pioneering effort alongside abu dhabi investment authority and the us treasury to develop the 9 generally accepted principles practices for sovereign wealth funds swfs and recipient countries these were the foundation of the santiago principles a voluntary set of 24 guidelines designed to promote good governance accountability transparency and prudent investment practices as well as maintain a stable and open investment climate the santiago principles are now observed by more than 20 member swfs including gic | |
what is the government pension fund of norway gpfn | the government pension fund of norway is made up of two separate norwegian investment funds with different mandates the first is the government pension fund global gpfg also known as the oil fund established in 1990 to invest surplus revenues of the norwegian petroleum sector 1 the gpfg is the world s largest sovereign wealth fund 2 it also holds real estate and fixed income investments 3 the second fund is the government pension fund of norway gpfn established in 1967 as something of a national insurance fund it is smaller than the oil fund 4 it is managed separately and limited to domestic and scandinavian investments as a result it is a major shareholder of many consequential norwegian companies via the oslo stock exchange 5 understanding the government pension fund of norway gpfn the government pension fund of norway is managed under the guise of the ministry of finance as laid out by the act of parliament and guidelines that include a set of supplementary provisions 6 the norges bank investment management nbim which is part of the norwegian central bank manages the global fund on behalf of the ministry of finance 7 since 2004 an ethical council has set the parameters for the fund s investments the council has the authority to exclude from the fund firms that take part in activities deemed objectionable 8 investment manager folketrygdfondet manages the domestic fund 7 the stated goal of the government pension fund is to facilitate government savings to account for the rising costs of the public pension program it also intends to support long term considerations related to how the government spends norway s significant petroleum revenues 9 the ministry of finance s investment strategy for the government pension fund looks to maximize returns while taking on a moderate level of risk the strategy is based on assessments of expected return and risk in the long run and is derived from the purpose and distinctive characteristics of the fund comparative advantages of the asset manager as well as assumptions regarding the functioning of the financial markets the ministry attaches considerable weight to financial theory research and accumulated experience 10 notably the government pension fund global may divest its oil and gas holdings in the near future at the end of 2017 the fund recommended the removal of more than nok 300 billion about us 35 billion worth of oil and gas holdings from the fund s equity benchmark index in order to make norway less vulnerable to a permanent drop in oil and gas prices 11 after hitting the 1 trillion mark in 2017 the fund divesting from oil and gas investments could have meaningful global investment implications given the economic importance of the energy sector investor attention on environmental social and governance criteria has increased as part of their investment due diligence the norwegian government reached a final decision on the proposal in the fall of 2018 12 | |
what are government purchases | government purchases are expenditures on goods and services by federal state and local governments the combined total of this spending excluding transfer payments and interest on the debt is a key factor in determining a nation s gross domestic product gdp transfer payments are expenditures that do not involve purchases such as social security payments welfare and government subsidies for certain businesses understanding government purchasesone method of calculating gdp a measure of the market value of all the final goods and services produced in a specific time period within a country s borders that s used to track the health of a nation s economy is to add up all spending in four major categories the u s bureau of economic analysis bea has a number of sub categories for instance it breaks down government purchases into federal state and local spending and also differentiates defense related federal spending from all other spending the total for imported goods is subtracted from the final gdp total 2government purchases have risen in real terms over recent decades as a share of overall nominal gdp however nominal government purchases have been falling special considerationsgovernment purchases are seen as a crucial element of a healthy economy in keynesian economic theory that is increasing or decreasing government spending is viewed as a key tool for regulating the business cycle according to this theory government spending boosts demand in two ways first the government directly boosts demand by purchasing goods such as the steel needed to build a bridge secondly it puts money in the pockets of both workers and suppliers who then spend it on goods and services this is known as the multiplier effect plenty of other economists are against the government spending lots of money arguing that such action distorts interest rates props up non competitive firms and leads to higher taxes and so forth types of government purchasesgovernment purchases range from spending on infrastructure projects and paying civil service and public service employees to buying office software and equipment and maintaining public buildings transfer payments which do not involve purchases are not included in this category the bea attributed a rise in federal government spending in 2020 mainly to an increase in purchases of intermediate services to support the processing and administration of paycheck protection program loan applications 3in 2020 the bea revealed that federal government spending rose while state and local government spending fell overall real gdp in a year overshadowed by crisis and the economically damaging lockdown measures was estimated to have fallen by 3 5 4 | |
what was the government securities clearing corporation | the government securities clearing corporation gscc was an organization that was responsible for clearing and netting trades for government and agency debt securities the gscc handled new issues and the sale of existing government securities it was established in the 1980s by the national securities clearing corporation nscc the gscc merged with the mortgage backed securities clearing corporation to form the fixed income clearing corporation ficc in 2003 1understanding the government securities clearing corporation gscc centralized clearance and settlement services in the u s government securities market were conducted through the government securities clearing corporation the gscc was tasked with reporting validating and matching the buy and sell sides of securities transactions it compared transactions and acted as the counterparty for settlement purposes for each net position the corporation also served several other key areas including automated trade comparison risk management and operational efficiency to the u s government securities market securities transactions processed by the gscc included the final net settlement obligations of gscc participants were settled through the fedwire securities service via the participants settlement bank the organization gscc cleared about 1 6 trillion a day in trades involving u s government securities until 2002 2the gscc merged with the mbs clearing corporation in 2003 to form the fixed income clearing corporation which is a subsidiary of the depository trust clearing corporation dtcc 3the gscc s role as a counterparty served an important purpose as the organization maintained the liquidity and integrity of the market for u s government securities history of the government securities clearing corporation gscc the gscc was established in 1986 3 it came after several large primary dealers and the federal reserve voiced concerns about the safety and soundness of the existing processes for government securities the move included the risks associated with the failure of a major firm the inefficiencies of manual paper processing of trade confirmations and bilateral trade for trade settlement the board of directors of gscc was made up of representatives from primary dealers and clearing banks plus a management director gscc s president and two directors designated by nscc the government securities clearing corporation gscc vs the fixed income clearing corporation ficc as mentioned above the gscc and the mbscc merged to form the ficc the move was an attempt to become more cost efficient in clearing and netting services the merger went into effect in 2003 at which time the ficc began its operations the ficc provides the same services that were previously offered by the gscc and the msbcc but under two separate divisions these two distinct subsidiaries of the dtcc essentially operate as the gscc and mbscc did in the past while they do offer their own services to their own members each maintains a separate collateral margin pool | |
what is a government security | in the investing world government security applies to a range of investment products offered by a governmental body for most readers the most common types of government securities are those items issued by the u s treasury in the form of treasury bonds bills and notes however the governments of many nations will issue these debt instruments to fund necessary ongoing operations government securities come with a promise of the full repayment of invested principal at maturity of the security some government securities may also pay periodic coupon or interest payments these securities are considered conservative investments with low risk since they have the backing of the government that issued them understanding government securitiesgovernment securities are debt instruments of a sovereign government they sell these products to finance day to day governmental operations and provide funding for special infrastructure and military projects these investments work in much the same way as a corporate debt issue corporations issue bonds as a way to gain capital for buying equipment funding expansion and paying off other debt by issuing debt governments can avoid hiking taxes or cutting other areas of spending in the budget each time they need additional funds for a project after issuing government securities individual and institutional investors will buy them to either hold until maturity or sell to other investors on the secondary bond market investors buy and sell previously issued bonds in the market for a variety of reasons they may be looking to earn interest income from the bond s periodic coupon payments or to allocate a portion of their portfolio into conservative risk free assets these investments are often considered risk free because when it comes the time for redemption at maturity the government can always print more money to satisfy the demand government securities come in a variety of forms but the best known types are the ones issued by the u s treasury treasury bonds bills and notes the u s vs foreign securitiesas already mentioned the united states is only one of many countries that issues government securities to fund operations u s treasury bills bonds and notes are considered risk free assets due to their backing by the american government italy france germany japan and many other nations also float government bonds however government securities issued by foreign governments can carry the risk of default which is the failure of paying back the principal amount invested if a country s government collapses or there s instability a default can occur when purchasing foreign government securities it s important to weigh the risks which can include economic country and political risks as an example of such default risk one needs to look no further than 1998 when russia defaulted on its debt investors were shocked by their losses as the country devalued the ruble this downturn came on the heel of and was in some part brought about by the asian financial crisis of the same decade the asian crisis was a series of currency devaluations by many nations throughout asia that sent shock waves around the financial globe although u s government securities or treasuries are risk free investments they tend to pay lower interest rates as compared to corporate bonds as a result fixed rate government securities can pay a lower rate than other securities in a rising rate environment which is called interest rate risk also the low rate of return may not keep up with rising prices in the economy or the inflation rate buying government securitiesthe u s treasury department issues government securities through auctions to institutional investors for buying and selling retail investors can purchase government securities directly from the treasury department s website banks or through brokers since most u s government securities have the full faith and credit of the u s government default on these products is unlikely the purchase of foreign government bonds also known as yankee bonds is a bit more complicated than buying the american version of the securities investors must work with brokers who have international experience and may need to meet specific qualifications some investors will assume the heightened aspects of political risk along with currency risk credit risk and default risk to reap the greater yields some bonds will require the creation of offshore accounts and have high minimum investment levels also some foreign bonds fall into the category of junk bonds due to the risk attached to their purchase controlling money supply through government securitiesthe federal reserve the fed controls the flow of money through many policies one of which is the selling of government bonds as they sell bonds they reduce the amount of money in the economy and push interest rates upward the government can also repurchase these securities affecting the money supply and influencing interest rates called open market operations omo the federal reserve the fed buys bonds on the open market reducing their availability and pushing the price of the remaining bonds up as bond prices rise bond yields fall driving interest rates in the overall economy lower new issues of government bonds are also issued at lower yields in the market further driving down interest rates as a result the fed can significantly impact the trajectory of interest rates and bond yields for many years the supply of money changes with this buying and selling as well when the fed repurchases treasuries from investors the investors deposit the funds in their bank or spend the money elsewhere in the economy this spending in turn stimulates retail sales and spurs economic growth also as money flows into banks through deposits it allows those banks to use those funds to lend to businesses or individuals further stimulating the economy government securities can offer a steady stream of interest incomedue to their low default risk government securities tend to be safe haven playssome government securities are exempt from state and local taxesgovernment securities can be bought and sold easilygovernment securities are available through mutual funds and exchange traded fundsgovernment securities offer low rates of return relative to other securitiesthe interest rates of government securities don t usually keep up with inflationgovernment securities issued by foreign governments can be riskygovernment securities often pay a lower rate in a rising rate marketexamples of government securitieshere are some of the most commonly issued government securities savings bonds offer fixed interest rates over the term of the product should an investor hold a savings bond until its maturity they receive the face value of the bond plus any accrued interest based on the fixed interest rate once purchased a savings bond cannot be redeemed for the first 12 months it is held also redeeming a bond within the first five years means the owner will forfeit the months of accrued interest treasury bills t bills have typical maturities of 4 8 13 26 and 52 weeks these short term government securities pay a higher interest rate return as the maturity terms lengthen for example as of sept 10 2021 the yield on the four week t bill was 0 06 while the one year t bill yielded 0 08 treasury notes t notes have two three five or 10 year maturities making them intermediate term bonds these notes pay a fixed rate coupon or interest payment semiannually and will usually have 1 000 face values two and three year notes have 5 000 face values yields on t notes change daily however as an example the 10 year yield closed at 1 35 on sept 10 2021 over a 52 week range the yield varied between 0 07 and 0 08 treasury bonds t bonds have maturities of between 10 and 30 years these investments have 1 000 face values and pay semiannual interest returns the government uses these bonds to fund deficits in the federal budget also as mentioned earlier the fed controls the money supply and interest rates through the buying and selling of this product | |
what is a government shutdown | a government shutdown happens when nonessential u s government offices can no longer remain open due to a lack of funding the lack of funding usually occurs when there is a delay in the approval of the federal budget that will finance the government for the upcoming fiscal year the shutdown remains in effect until funding legislation is passed 1during a government shutdown many federally run operations will halt some organizations may still stay open by running on cash reserves but once these funds run out they will also close while shutdowns can also occur within the state territorial and local levels of government the term government shutdown is usually used to refer to the federal government understanding a government shutdownduring a government shutdown the u s federal government is required to reduce agency activities and services and cease any non essential operations including furloughing non essential workers some agencies remain open during a government shutdown these services are those that if suspended would endanger the health life or personal safety of the public essential employees in departments covering the safety of human life or protection of property also remain employed however these employees may not earn a paycheck during the time of the government shutdown unless a specific spending bill is passed to fund those work hours 2essential employees include those working in the drug enforcement agency dea the transportation security administration tsa customs and border protection cbp and the federal bureau of investigation fbi in addition both the federal reserve and the postal service will both continue their operations because neither receive federal funds 34during a government shutdown the disbursement of payments from government sources to citizens for veterans benefits or unemployment insurance will continue these programs receive money from specially earmarked budgets and funds from advanced congressional appropriations furloughed federal employees may also apply for temporary unemployment but the processing of claims may be prolonged 56government shutdowns can affect many government processing functions nonessential agencies who cannot self fund through the collection of fees or other revenue sources may be forced to furlough or give unpaid leave to their employees most of the public will see the effect of the government shutdown in the lessening of services they may expect or receive perhaps the most visual of these closings is in the shutting down of national parks and monuments however the real effects of a government shutdown are widespread it may take longer or be impossible to process new loans for homes businesses and education new applications for social security benefits and the processing of unemployment insurance will also slow death benefits and travel reimbursements will not be paid to the surviving family of service members killed during their military service 7there are various other impacts of a government shutdown this includes the delay or halting of the united states department of agriculture s inspection of some food products and the preclusion of the consumer product safety commission cpsc from recalling unsafe products and travelers may be unable to receive new passports which are issued by the u s department of state 8910 in addition the centers for disease control and prevention cdc may be unable to identify and track outbreaks of illness 11if the government shutdown remains in place long enough more agencies will close or reduce the services they provide to the public as a whole and a larger portion of the american population will begin to see the direct effects impact on the economyas government operations slow or stop altogether the effects may also spread to businesses in the private sector it s possible that the entire economy may lose money as a result of this disruption in government operations however the overall cost and lasting impact of a government shutdown on the economy may vary for example the government shutdown of 2013 which lasted for 16 days was estimated to have cost the u s economy 24 billion in losses 1213furloughed federal employees may individually curtail their spending collectively this can have an impact on local businesses if a substantial number of federal workers are furloughed and not spending as expected the companies that typically serve them may see a revenue decrease companies that cater to the needs of federal agencies office supply businesses for example will see the impact in reduced sales business such as hotels restaurants and other hospitality services that cater to the visitors of u s national parks and monuments will lose business during a shutdown furthermore banks while not government controlled are not able to access the information they need to process loan applications during government shutdowns for example banks must be able to verify the income submitted on the applicant s tax records during a loan application process this can also produce reverberations in the economy as a whole because the fees that banks charge to process loans impact the bank s revenues and ultimately the inability to finance a new home will impact the housing market as a whole special considerationsthe funding of the u s government s budget is a long and complicated process that involves the coordination and cooperation of many stakeholders including the president the house of representatives the senate and the federal agencies and departments that will receive the funding many events may delay the budget s approval including economic downturns political politics and the efforts of lobbyists every year governmental agencies submit budget requests to the white house to continue operations the president and his staff review and revise these funding requests and then petition congress to provide the requested funds the house and senate congressional appropriations committees will consider the president s funding request the committees will also typically make adjustments to the amounts the agencies initially asked to receive after they reach a consensus on budget amounts a bill goes to both the house of representatives and the senate after a debate there is a floor vote next the bill is returned to the white house to be signed into law or vetoed real world exampleat midnight on dec 21 2018 the united states entered a government shutdown president trump and members of congress were unable to agree on funding for the fiscal year 2019 this government shutdown impacted approximately 800 000 federal employees in a fact sheet released by the senate appropriations committee it was revealed that more than 420 000 federal employees were expected to work without pay and more than 380 000 federal employees would be placed on furlough this shutdown lasted 35 days the longest government shutdown in u s history 1415 | |
what is a government sponsored enterprise gse | a government sponsored enterprise gse is a quasi governmental entity established to enhance the flow of credit to specific sectors of the u s economy created by acts of congress these agencies although they are privately held provide public financial services gses help to facilitate borrowing for a variety of individuals including students farmers and homeowners for example the federal home loan mortgage corp freddie mac was originally created as a gse in the housing sector it was intended to encourage homeownership among the middle and working classes freddie mac is considered a mortgage gse 1another example of mortgage gses is the federal national mortgage association fannie mae this entity was introduced to improve the flow of credit in the housing market while also reducing the cost of that credit | |
how a government sponsored enterprise gse works | gses do not lend money to the public directly instead they guarantee third party loans and purchase loans in the secondary market thereby providing money to lenders and financial institutions gses also issue short and long term bonds referred to as agency bonds the degree to which an agency bond issuer is considered independent of the federal government impacts the level of its default risk bond investors holding most but not all types of agency bonds have their interest payments exempt from state and local taxes although gse bonds carry the implicit backing of the u s government unlike treasury bonds they are not direct obligations of the u s government for this reason these securities offer a slightly higher yield than treasury bonds since they have a somewhat higher degree of credit risk and default risk examples of government sponsored enterprises gses the first gse the farm credit system fcs was created in 1916 to serve the farming sector 2 the fcs still exists as a network of federally chartered borrower owned lending institutions they are tasked with providing an accessible source of credit to farmers ranchers and other entities involved in agriculture the fcs receives its funding capital from the federal farm credit banks funding corp which sells bonds on securities markets 3 another farming gse the federal agricultural mortgage corp farmer mac was created in 1988 and guarantees the timely repayment of principal and interest to agricultural bond investors 4to stimulate the housing segment in 1932 the government established the federal home loan bank fhlb system which is owned by more than 8 000 community financial institutions 56 fannie mae ginnie mae and freddie mac were chartered later in 1938 1968 and 1970 respectively 7 the housing gses purchase mortgages from lenders on the secondary mortgage markets the proceeds from the sale are used by lenders to provide more credit to borrowers or mortgagors one difference between ginnie mae and fannie mae is that ginnie mae is owned by the government and part of the u s department of housing and urban development hud therefore it s not considered a gse slm corp sallie mae was created in 1972 to target the education sector while the establishment originally serviced and collected federal student loans on behalf of the u s department of education it ended its ties to the government in 2004 8 sallie mae now offers student loans privately along with advice on financing higher education and federal loan programs special considerationsthe aggregate loans of gses in the secondary market make them some of the largest financial institutions in the united states a collapse of even one gse could lead to a downward spiral in the markets which could lead to an economic disaster since they have an implicit guarantee from the government that they will not be allowed to fail gses are considered by critics to be stealth recipients of corporate welfare in fact following the 2008 subprime mortgage crisis fannie mae and freddie mac received a combined 187 billion worth of federal assistance 9 this large sum was intended to mitigate the negative impact that the wave of defaults was wreaking on the housing market and the national economy they were also placed into government conservatorship both agencies have repaid their respective bailouts since then though they remain under the control of the federal housing finance agency 10 | |
what is a government sponsored enterprise | a government sponsored enterprise gse is an entity that congress created to increase the flow of credit in certain areas of the u s economy particularly real estate gses differ from government agencies the main difference is that gses are privately held organizations while government agencies are run directly by the federal government | |
what is an example of a government sponsored enterprise gse | the federal national mortgage association fannie mae the federal home loan mortgage corp freddie mac and the federal home loan bank fhlb system are government sponsored enterprises gses in the housing finance market slm corp sallie mae is a student loan gse and the farm credit system fcs and the federal agricultural mortgage corp farmer mac are agricultural gses 11 | |
is freddie mac a government sponsored enterprise | yes freddie mac is a government sponsored enterprise in the housing finance market as a housing gse freddie mac is a federally chartered shareholder owned private company with a public mission to provide stability in and increase the liquidity of the residential mortgage market according to the white house 12 freddie mac also helps increase the availability of mortgage credit to low and moderate income families and in underserved areas the bottom linecongress created government sponsored enterprises gses to increase stability and liquidity in certain areas of the u s economy particularly real estate gses do not loan money to consumers rather they guarantee certain loan products making financing more widely available especially for consumers who may not otherwise qualify correction may 29 2023 the latest version of this article has removed ginnie mae as an example of gse | |
what is a government sponsored retirement arrangement gsra | a government sponsored retirement arrangement gsra is a canadian retirement plan for individuals who are not employees of a local provincial or federal government body but who are paid for their services from public funds because this type of retirement plan is not registered with the canada revenue agency cra the canadian equivalent of the american irs it does not qualify for tax deferred status or tax deductions | |
what is a government wide acquisition contract gwac | a government wide acquisition contract gwac is a contract in which multiple government agencies align their needs and purchase a contract with external providers for goods or services gwacs allow agencies to purchase new technology such as computers and information technology solutions at a better price since taxpayers are the ones footing the bill contracts may be spearheaded by one agency with the expectation that others will sign on gwacs allow for economies of scale which usually reduce per unit costs understanding government wide acquisition contracts gwacs as noted above gwacs are contracts for it and computer related services for government agencies provided by third parties one agency normally initiates the contract while other agencies sign on by having one agency evaluate a vendor the federal government can reduce the likelihood that other agencies will have to reinvent the wheel by undertaking their own separate vetting process gwacs provide access to it solutions including systems design software engineering information assurance and enterprise architecture solutions 1 contracts are commonly provided through the u s general services administration nasa and the national institute of health all of these entities allow for the government to procure a variety of contracts to obtain informational technology solutions at a low cost with a variety of tech companies that have been approved to participate the rise of government wide acquisition contracts allows government agencies to take advantage of their size to negotiate lower prices this reduces the burden on taxpayers who are ultimately responsible for the bill the use of gwacs also creates an environment in which a single vendor provides product and service support to more personnel a government wide acquisition contract consolidates purchases as opposed to having each agency enter into an individual contract special considerationsthe gwac prices paid tool provides federal agencies with detailed information on how their it dollars are spent on gsa gwacs these tools help provide realistic price analyses negotiations and independent government cost estimates they also help agencies benchmark competitive prices 2government contracts amounted to roughly 694 billion in the 2022 fiscal year this figure included multiple contract categories including software as well as food healthcare and aircraft the department of defense spent the most at 414 5 billion headed by the navy with 123 9 billion while contracts through civilian federal agencies totaled 279 7 billion veterans affairs 56 2 billion the department of energy 42 9 billion and hhs 38 9 billion were the top spenders 3gwacs are delivery or task order contracts this means they do not provide a specific amount of services rather the terms are set for a certain period during which the provider delivers an unlimited supply of services until the contract expires for instance company x may be contracted to provide unlimited it solutions to three agencies for a full year types of gwacs | |
how to use a gwac | there are a few steps that come with using a gwac to buy it solutions for a specific federal agency these are as follows additional steps to using a gwac include requesting an optional scope review and requesting an optional capabilities statement 5 | |
why are government wide acquisition contracts used | government wide acquisition contracts are used to provide government agencies with it and computer related services at a reduced cost the idea behind them is that one government agency initiates the contract with the expectation that others will sign on gwac providers offer services for a specified time rather than a certain finite quantity | |
what is an indefinite delivery indefinite quantity contract | the term indefinite delivery indefinite quantity contract refers to a type of contract for goods and services that expires within a certain time frame these types of contracts streamline the speed and delivery when the quantity of services can t be determined | |
what is a nasa sewp contract | a nasa sewp contract is a type of government wide acquisition contract it procures and provides it products and services for federal government agencies the contract is initiated by nasa which is known as the executive agent in the contract other agencies may sign on to receive services which helps reduce the cost each agency has to spend the bottom linegovernment agencies use government wide acquisition contracts to cut down the cost of it services one agency acts as the executive agent or initiator of the gwac with the expectation that other agencies will join having other parties take part in the contract allows them to reduce their costs ultimately passing the savings on to taxpayers | |
what is a grace period | a grace period is a set length of time after the due date during which payment may be made without penalty a grace period typically of 15 days is commonly included in mortgage loan and insurance contracts 1 | |
how a grace period works | a grace period allows a borrower or insurance customer to delay payment for a short period of time beyond the due date during this period no late fees are charged and the delay cannot result in default or cancellation of the loan or contract in most cases payment after the due date but during the grace period does not cause a black mark to be added to the borrower s credit report however it s important to check the contract for the specifics on the grace period under some loan contracts no additional interest is charged during the grace period but the majority add compound interest during the grace period | |
when defining a grace period on a loan it is important to note that credit cards do not have grace periods for their monthly minimum payments a penalty for late payment is added immediately after the due date and interest continues to be compounded daily | a payment after the due date but during the grace period generally does not cause a black mark on the borrower s credit report however the term grace period is used to describe one scenario in consumer credit a period of time before which interest may be charged on new purchases on a credit card is called a grace period this grace period of 21 days is meant to protect consumers from being charged interest on a purchase before the monthly payment is due 23examples of grace periodsif a consumer has a mortgage with a due date on the fifth of every month and the contract has provided a five day grace period the payment can be received as late as the 10th of the month without the borrower incurring any penalties this is an example of a loan grace period in a mortgage loan the grace period for credit card purchases is a newer phenomenon and was established with the credit card act of 2009 before that consumer protection law went into effect some lenders began charging interest on purchases immediately after they were made even a consumer who paid off a new purchase in full by the next payment date would be charged interest before the bill was even received the act includes a provision that requires credit card issuers to give a grace period of at least 21 days for the borrower to repay the charge without incurring any interest charges on the purchase 2notably this grace period does not necessarily apply to cash advances or balance transfers the terms of these are detailed in the credit card agreement grace period vs defermentsimilar to grace periods a deferment is a period of time in which a borrower is not required to make payments on a loan usually in cases of financial hardship unlike grace periods deferment is usually not automatic borrowers typically have to request or apply for a deferment and provide documentation to show why they are unable to make payments in most cases loans continue to accrue interest during a deferment so it is wise to make any payments that you can during these periods loans may accrue interest during a deferment or grace period depending on the terms of the contract you should continue paying as much as possible to avoid paying extra further down the line special considerationsany contract that has a grace period will also include language that explains what will happen if the payment is not made by the end of that period penalties can include a late payment fee a penalty interest rate hike or the cancellation of a line of credit in cases where an asset is pledged as collateral multiple missed payments can result in the seizure of the asset by the lending institution | |
what does grace period mean | a grace period is the period of time after payment is due but before late fees interest or other penalties start to accrue different contracts will have different grace periods a monthly rental contract might have a grace period of five days while student loan contracts have a grace period of six months after graduation 4 | |
what are some things you can do during the grace period | for student borrowers the six month grace period is often used to find a job choose a repayment plan that fits their budget or enroll in another higher education program this allows borrowers to establish a career before loan payments begin | |
what is another word for grace period | grace periods are sometimes referred to as forgiveness periods although this is a misnomer debt obligations are not forgiven during grace periods they are simply postponed for a short period of time grace periods should not be confused for deferments or moratoriums which are time periods in which a lender allows the borrower to miss payments due to hardships or other reasons | |
what is the grace period of an insurance policy | in insurance the grace period is the time between the payment due date and the time when insurance coverage will be revoked due to nonpayment this may be anywhere between 24 hours and a full month after payment if you miss a payment and later choose to reinstate coverage your insurer may choose to inspect the property to make sure that there has been no new damage during the grace period there may be additional penalties for late payment | |
what is a grace period for work | in employment the grace period refers to the time after a new shift begins in which a late employee will not face any penalty a typical grace period is seven minutes since most time clocks round to the nearest quarter hour there is also a grace period for foreign specialists on work visas if an employee is terminated from their sponsoring employer they may remain in the united states for up to two months to find a new job 5the bottom linegrace periods allow borrowers to miss a payment due date without suffering additional penalties a generous grace period can be a lifeline to forgetful borrowers or those with short term hardships however a grace period is not an excuse to miss a payment it s important to carefully read the terms of any contract in order to understand your obligations and options for payment | |
what is graded vesting | graded vesting is the process by which employees gain over time ownership of employer contributions made to the employee s retirement plan account traditional pension benefits or stock options graded vesting differs from cliff vesting in which employees become fully vested following an initial period of service and immediate vesting in which contributions are owned by the employee as soon as they start the job understanding graded vestinggraded vesting encourages employee loyalty since the vesting plays out over a few years of continuous employment many employers offer matching contributions to workers tax deferred retirement accounts as a way to attract employees and to score corporate tax benefits in some cases these matches are 100 up to certain limitations perhaps 7 of salary in that case an employee who earns 75 000 and contributes 7 of their earnings to a 401 k account would save 10 500 towards retirement every year with only 5 250 coming out of their own pocket over many years that employer contribution dramatically boosts retirement savings but while those contributions are real money that gets invested every year the principal and potential gains show up only on paper until the employee is vested employers must follow certain federal laws that determine the longest allowable vesting periods generally six years however they are free to choose shorter periods in addition if a plan is terminated all participants become fully vested immediately contributions to seps and simple iras always fully vest immediately and an employee s personal contributions to any retirement plan are always fully vested and belong to the employee even should they leave the job it s important for employees to understand their company vesting schedule since quitting a job before the full vesting period could mean leaving free money on the table whether in the form of tax deferred retirement savings a pension plan or stock options any principal and potential gains show up only on paper until the employee is vested in a typical graded vesting schedule an employee becomes vested in 20 of their accrued benefits following an initial period of service with an additional 20 in each following year until full vesting occurs the initial period of service often varies for example if an employer s contribution is based on a fixed percentage of the employee s contribution the initial period of service might be two years after two years the employee would be 20 vested after three years 40 with the employee eventually becoming fully vested after six years some companies feel that the gradual vesting of the employee helps to retain the employee over a longer period of time than cliff investing the thought behind this is if an employee is gradually rewarded with their vestments they are more likely to feel taken care of by the company | |
what is the graduate management admission test gmat | the graduate management admission test gmat is a standardized test used to measure a test taker s aptitude in mathematics verbal skills and analytical writing the gmat is most commonly used as the primary exam reviewed by business schools to gain entrance into an mba program the exam is generally offered by computer only in areas of the world where computer networks are limited the exam may be given as a paper based test understanding the graduate management admission test gmat the gmat exam consists of four sections analytical writing assessment verbal reasoning integrated reasoning and quantitative reasoning 1 the maximum score achievable for the gmat is 800 and exam scores are generally valid for five years following the exam s completion 2 on average the exam takes three and one half hours to complete 1every year over 255 000 individuals take the gmat 3 as of august 2023 it costs 275 to take the test at a test center and 300 to take it online in the u s 4 due to the widespread nature of the admissions test gmats are offered almost every day of the year and can be taken every 16 calendar days however the test can be taken no more than eight times total and no more than five times in a 12 month period 5 most applicants take the exam once or twice before applying | |
how the gmat is applied | the graduate management admission council administers the exam in addition to testing comprehension of writing and math the gmat is also used to assess an individual s critical reasoning skills and logic as applicable to business and management in the real world starting in 2012 the exam added a section called integrated reasoning which assesses an individual s evaluation skills for dealing with information gathered from multiple sources and in new formats this section also intends to test students in the context of working with data and technology 6approximately 3 391 graduate programs and institutions around the world use the gmat to assess applicants to their programs the graduate management admission council has recommended that the gmat be used as one factor for determining whether a student is accepted into a program 3 | |
what is a graduated lease | a graduated lease is an agreement under which a tenant and landlord agree to a periodic adjustment of monthly payments for example the agreement may reflect an increase in the tenant s payments due to market conditions or an increase in the value of the leased property | |
how a graduated lease works | a graduated lease tends to benefit the property owner over the long term but the arrangement offers advantages to both the landlord and the tenant a graduated lease allows the property owner or lessor the opportunity to charge increased rent as property values increase over time the tenant or lessee can take possession of a property at what may be a discounted rate in the short term this can often help during the ramp up stage of a new business venture graduated leases are also known as graded leases graduated leases tend to be structured for longer terms than traditional straight or fixed leases which typically have one to two year terms from a lender s perspective a graduated lease is a better fit for real estate agreements than equipment agreements because real estate values tend to appreciate over time a lessor would be unlikely to offer a graduated lease on an automobile for instance because the value of a car depreciates steadily over time this depreciation could lead to decreasing monthly payments triggers for rent increase under a graduated leasetraditionally adjustments in graduated leases occur due to one of the following four factors | |
what is a graduated payment mortgage gpm | a graduated payment mortgage gpm is a type of fixed rate mortgage for which the payments increase gradually from an initial low base level to a higher final level typically the payments will grow between 7 to 12 annually from their initial base payment amount until the full monthly payment amount is reached | |
how graduated payment mortgages work | a graduated payment mortgage is designed to start with the homeowner owing minimum payments then over time the payment amount increases a low initial interest rate is what qualifies the buyer this lower rate allows many who might not otherwise qualify for a home mortgage to be eligible because they can afford the low initial payments had the note been written at a higher interest rate these buyers may not have qualified due to the higher monthly payments this type of mortgage payment system may be optimal for young or first time homeowners because their income levels tend to rise gradually a graduated payment mortgage may or may not be a negative amortization loan if the initial payment amount is less than the accruing interest on the mortgage loan the graduated payment mortgage is a negative amortization loan with a negative amortization loan the payments the borrower makes are less than the interest charged on the note this payment structure creates deferred interest which adds to the total principal of the loan 1graduated payment mortgages are only available on loans from the federal housing administration fha fha loans allow low to moderate income borrowers who are unable to make a large down payment finance up to 96 5 of the home s value 2benefits of a graduated payment mortgagegraduated payment mortgages can offer homebuyers some key benefits some of the advantages associated with graduated payment mortgage loans include 3choosing a graduated payment mortgage could make it easier to buy a home now versus having to wait until later when you re earning a higher income you may also be able to get more home for your money by accepting a payment structure that evolves alongside your income the key is the relative certainty that you ll be able to afford your mortgage payments over time as they increase drawbacks of a graduated payment mortgagethe primary disadvantage of a graduated payment mortgage is that the total costs associated with the mortgage are higher than those of a traditional mortgage as payments grow to higher interest rates the borrower may find they are only paying the interest charges and not reducing the principal borrowed also if the graduated payment mortgage is a negative amortization loan the borrower will pay even more interest on the loan as deferred interest adds to the principal borrowed this value grows then interest calculations are based on the more substantial amount another major drawback that must bear consideration is that with a graduated payment mortgage there is no guarantee that the borrower s income will increase in step with the increased mortgage payments if the borrower s income does not rise in proportion with the monthly debt they may default on the loan the default will further damage their credit and the lender will foreclose on the property paying off a graduated payment mortgage ahead of schedule could result in a prepayment penalty 4graduated payment exampleit can help to see an example of what a graduated payment mortgage looks like so assume you re taking out a 300 000 loan with a 30 year repayment term at 3 the annual graduation rate is 2 with a total of five annual graduations here s what your payment might look like so what would your mortgage cost if you borrowed 300 000 at 3 over a 30 year term with no graduations your monthly payment for principal and interest would come to 1 265 using a graduated payment mortgage calculator can help with estimating monthly payments versus what you might pay for a traditional mortgage loan graduated payment mortgage vs adjustable rate mortgagethough a graduated payment mortgage may seem like a type of adjustable rate mortgage arm it is not the same thing an adjustable rate mortgage fluctuates periodically to reflect the market interest rate the arm rate is adjusted periodically but not on a fixed schedule also the interest rate may decrease or climb due to its basis on the going market rate conversely the interest rate on a graduated payment mortgage only goes up some arms allow for interest only payments though this may result in a lower monthly payment it won t help you to reduce the principal owed on the loan faqs | |
what is a graduated payment mortgage | a graduated payment mortgage is a type of home loan in which monthly payments start out at one amount then increase gradually over time this type of mortgage is designed to help homebuyers who may have difficulty qualifying for a loan because they earn a lower income who should consider a graduated payment mortgage a graduated payment mortgage may be right for someone who expects their income to increase steadily in future years if you don t have a realistic expectation that your income will rise over time a graduated payment mortgage could be problematic as your monthly payments increase | |
how are graduated payments calculated | graduated payments are calculated using the mortgage loan amount the interest rate the annual graduation rate and the number of graduations applied you can calculate monthly payments for a graduated mortgage using an online loan calculator | |
what is the graham number | the graham number or benjamin graham s number measures a stock s fundamental value by taking into account the company s earnings per share eps and book value per share bvps the graham number is the upper bound of the price range that a defensive investor should pay for the stock according to the theory any stock price below the graham number is considered undervalued and thus worth investing in understanding the graham numberthe graham number is named after the father of value investing benjamin graham it is used as a general test when trying to identify stocks that are currently selling for a good price the 22 5 figure is included in the calculation to account for graham s belief that the price to earnings p e ratio should not be over 15x and the price to book ratio should not be over 1 5x thus 15 x 1 5 22 5 the graham number can thus be alternatively calculated as 15 1 5 net income shares outstanding shareholders equity shares outstanding sqrt 15 times 1 5 times left frac text net income text shares outstanding right times left frac text shareholders equity text shares outstanding right 15 1 5 shares outstandingnet income shares outstandingshareholders equity essentially this second method of calculation is equivalent to the first wherein eps net income shares outstanding and book value is another term for shareholders equity the formula for graham number22 5 earnings per share book value per share sqrt 22 5 times text earnings per share times text book value per share 22 5 earnings per share book value per share | |
where | according to benjamin graham the current price should not be more than 1 1 2 times the book value last reported however a multiplier of earnings below 15 could justify a correspondingly higher multiplier of assets as a rule of thumb the product of the multiplier times the ratio of price to book value should not exceed 22 5 example of the graham numberfor example if the earning per share for a single share of company abc is 1 50 the book value per share is 10 the graham number would be 18 37 22 5 1 5 10 1 2 18 37 again 18 37 is the maximum price an investor should pay for a share of abc according to graham if abc is priced at 16 it is attractive if priced at 19 it should be avoided limitations of the graham numberthe calculation for the graham number does leave out many fundamental characteristics which are considered to comprise a good investment such as management quality major shareholders industry characteristics and the competitive landscape with regard to stocks and equity instruments fundamental analysis is a method of determining the value that focuses on key metrics and economic indicators such as revenues earnings where an industry is in its cycle return on equity roe and profit margins fundamental analysis relies on a company s financial statements one of the most famous and successful fundamental analysts warren buffett aka the oracle of omaha is famous for successfully employing fundamental analysis warren buffett was both a student and employee of benjamin graham the fundamental method of security analysis is considered to be the opposite of technical analysis | |
what is a good graham s number | graham s number will always present a maximum stock price given a company s eps and bvps as a result any stock price below that figure should signal a good buy for a value investor | |
how does the graham number work in value investing | the graham number takes a company s per share metrics and normalizes it based on a recommended upward limit for value investors of 15x p e and 1 5x p b who was benjamin graham benjamin graham is one of the founding fathers of value investing and a financial guru to many famous value investors such as warren buffett graham s philosophy was to closely examine a company s financial statements to identify undervalued opportunities his book the interpretation of financial statements is widely regarded as foundational for value investing the bottom linethe graham number measures a stock s fundamental value by taking into account the company s eps and bvps it represents the upper bound of the price range that a defensive investor should pay for a stock and it suggests that any stock price below the graham number is undervalued and thus worth investing in correction march 21 2024 this article has been corrected to state graham s belief that the price to book ratio should not be over 1 5x | |
what is unfunded pension plan | an unfunded pension plan is an employer managed retirement plan that uses the employer s current income to fund pension payments as they become necessary this is in contrast to an advance funded pension plan where an employer sets aside funds systematically and in advance to cover any pension plan expenses such as payments to retirees and their beneficiaries understanding unfunded pension plansa pension plan is a program offered by certain employers that provides a salary replacement when an employee is no longer working for example when the employee retires when employers offer a pension plan they can plan for the anticipated financial requirements of the pension plan and set aside a certain amount of money on a regular basis and invest the money to ideally grow the fund or fund the pension plan out of current earnings an unfunded pension plan is sometimes referred to as a pay as you go pension plan many public pension arrangements provided by a state are unfunded with benefits paid directly from current workers contributions and taxes the pension systems of many european countries are unfunded having benefits paid directly out of current taxes and social security contributions several countries have hybrid systems which are partially funded spain set up the social security reserve fund and france set up the pensions reserve fund 12 in canada the wage based retirement plan cpp is partially funded with assets managed by the cpp investment board while the u s social security system is partially funded by investment in special u s treasury bonds 34fully funded in contrast is a term that describes when a pension plan has sufficient assets to provide for all accrued benefits in order to be fully funded the plan must be able to make all the anticipated payments to pensioners a plan s administrator is able to predict the amount of funds that will be needed on a yearly basis this can help determine the financial health of the pension plan pay as you goboth individual companies and governments can set up pay as you go pensions the level of control exercised by individual participants of an unfunded pension plan depends on the structure of the plan and whether the plan is privately or publicly run unfunded pension plans run by governments may use the word contribution to describe the money that enters the fund but usually these contributions are taxed at a set rate and neither workers nor employers who contribute have any choice about if or how much they pay in to the plan private pay as you go pensions however offer their participants some discretion if an employer offers a pay as you go pension plan an individual participant likely gets to choose how much of their paycheck they wish to deduct and contribute toward their future pension benefits depending on the terms of the plan a participant may be able to either have a set amount of money pulled out during each pay period or contribute the amount in a lump sum this is similar to how several defined contribution plans such as a 401 k plans are funded | |
what is a unicameral system | a unicameral system is a government with one legislative house or chamber unicameral is the latin word that describes a single house legislative system countries with unicameral governments include armenia bulgaria denmark hungary monaco ukraine serbia turkey and sweden unicameral systems became more popular during the 20th century and some countries including greece new zealand and peru switched from a bicameral to a unicameral system smaller countries with long established democracies tend to have unicameral systems while larger countries may have either a unicameral or bicameral system understanding a unicameral systemto understand how a unicameral system works consider the national government of sweden sweden has a parliamentary system with a king as the formal head of the country and the prime minister serving as the seat of executive power there are 349 seats in the parliament and any political party that receives at least 4 of the vote during the national vote is granted seats the number of seats each party receives is based on the number of votes received and proportional representation by electoral district in 2020 nine parties had seats in parliament led by the social democrats with 100 seats or 28 7 and closely followed by the moderates with 70 seats or about 20 1 the green party and the independents had the smallest share at 4 6 and 0 6 seats respectively parliament votes on legislative bills which are proposed by members of parliament mps or by government all bills except the budget and changes to the constitution are approved by a simple majority vote of the parliament parliament also approves the prime minister the parliament meets annually and elections are held every four years neither the prime minister nor mps have term limits advantages of a unicameral vs bicameral systemwhile the major advantage of a bicameral system is that it can provide for checks and balances and prevent potential abuses of power it can also lead to gridlock that makes the passage of laws difficult a major advantage of a unicameral system is that laws can be passed more efficiently a unicameral system may be able to pass legislation too easily however and a proposed law that the ruling class supports may be passed even if the majority of citizens do not support it special interest groups may influence a unicameral legislature more easily than a bicameral one and groupthink may be more likely to occur because unicameral systems require fewer legislators than bicameral systems however they may require less money to operate these systems may also introduce fewer bills and have shorter legislative sessions a unicameral system for the u s government was proposed by the articles of confederation in 1781 but the delegates to the constitutional convention in 1787 created a plan for a bicameral system that was modeled on the english system america s founders could not agree on whether the states should each have the same number of representatives or whether the number of representatives should be based on population the founders decided to do both in an agreement known as the great compromise establishing the bicameral system of the senate and the house that we still use today the u s federal government and all the states except nebraska use a bicameral system while u s cities counties and school districts commonly use the unicameral system as do all the canadian provinces initially georgia pennsylvania and vermont had unicameral legislatures based on the idea that a true democracy should not have two houses representing an upper class and a common class instead a democracy should have single house representing all people each of these states turned to a bicameral system georgia in 1789 pennsylvania in 1790 and vermont in 1836 similar to the united states australia also has just one state with a unicameral system queensland a republican named george norris successfully campaigned to change nebraska s legislature from a bicameral to a unicameral system in 1937 norris claimed that the bicameral system was outdated inefficient and unnecessary norris said a unicameral system could maintain a system of checks and balances by relying on the power of citizens to vote and petition and by relying on the supreme court and the governor on matters that required another opinion further a bill may only contain one subject and may not pass until five days after its introduction most nebraska bills also receive a public hearing and each bill must be voted on separately three times some countries with unicameral systems have always held such a system while others have changed at some point by merging two houses or abolishing one new zealand abolished its upper house in the early 1950s when the opposition party took control from the labour party and voted to do away with the upper house | |
in the language of venture capital a unicorn refers to a privately held startup company with a valuation exceeding 1 billion these companies often found in technology and other sectors requiring massive capital to bring products to market have included household names like airbnb inc abnb | investopedia paige mclaughlin | |
what are unicorns | venture capitalist aileen lee popularized the term in the early 2010s i used the word unicorn because it is kind of magical that takes some alchemy some great timing a lot of things have to come together it s not easy she had said 2 the vast majority of companies that are venture funded and have people who are super smart and have great intentions and build great products they don t actually reach that level of valuation it s a pretty hard thing to do these privately held startups are said to defy traditional growth metrics leveraging supposed cutting edge or paradigm shifting advances to achieve rapid market penetration and exponential growth yet despite lee s intentions the term s prominence in the past decade has often highlighted something less magical than fantastical about many billion dollar firms whose values were based more on hype and occasionally outright fraud than fundamentals and traditional risk analysis their rarity during the low interest rates of the late 2010s and even as rates rose in the 2020s has also been less than the name for a mythic creature might suggest cb insights puts the number of such firms worldwide at about 1 200 in 2024 while crunchbase lists over 1 400 the same year 34below we explore what it means for a company to achieve unicorn status providing examples of notable unicorns that have either soared to new heights or fumbled as investors and sometimes regulators got a closer look at their books we ll also review the broader implications of unicorns for investors regulators and the global economy understanding unicornsa unicorn means a privately owned startup valued at over 1 billion 5 to become a unicorn companies must have an idea that appears innovative and marketable have a clear vision for growth and a viable way to pitch all this to venture capitalists and private investors aileen lee founder of palo alto based cowboy ventures a seed stage venture capital fund coined the term 5 reviewing software startups founded in the 2000s she estimated that only 0 07 ever reached a 1 billion valuation according to lee startups that reach this mark are so rare that finding one is as difficult as finding a mythical unicorn 5 she also argued that the first unicorns weren t the formed in a garage tech firms of the 1970s or the even earlier private venture firms of the 1950s but first arrived in the 1990s alphabet inc goog then google she noted was the clear super unicorn of the group earning the moniker with a valuation of more than 100 billion many unicorns arrived in the 2000s though meta platforms meta formerly facebook is the decade s only super unicorn 5 other more popular unicorns based in the u s include home sharing giant airbnb and fintech companies robinhood and sofi technologies inc sofi there are several options that unicorns have for their exit from startup status while unicorns are startups with valuations of over 1 billion companies with valuations of over 10 billion are called decacorns 2unicorn valuationsthe value of unicorns is generally based on how investors and venture capitalists feel they will grow and develop which comes down to longer term forecasting this means their valuations have nothing to do with their financial performance in fact many of these companies rarely generate any profits when they first get running and never do in the end investors and capitalists may come across some hurdles though if there are no other competitors in the industry making the startup a first of its kind there may be no other business model with which to compare making it a somewhat complicated process unicorns and venture investingsince the publication of lee s article the word unicorn has become widely used to refer to startups in the technology mobile technology and information technology sectors usually at the intersection of all three with very high valuations not necessarily supported by their fundamental finances benchmark capital partner bill gurley has been a famous critic of the term arguing that late stage investors are desperately afraid of missing out on acquiring shareholding positions in possible unicorn companies and have essentially abandoned their traditional risk analysis 6whether the technology sector s unicorns are just newer forms of hyper valuations seen in previous eras such as the dot com bubble of the late 1990s the customer funded business author john mullins has argued that the increase in the number of new companies valued above 1 billion is a clear sign of froth in markets 7others argue that the large number of companies with high valuations reflects a new wave of technologically driven productivity like the invention of the printing press nearly 600 years ago is the analogy often used 8 still others suggest that globalization and the monetary policy of central banks created great waves of capital sloshing around the globe on a hunt for unicorns since the great recession which was only catapulted by essentially interest free money in the late 1990s early 2020s the number of new unicorns has steadily declined since 2021 in 2021 there were over 500 new unicorns in 2022 that number dropped to just over 250 and in 2023 there were about 70 9examples of unicornsfar from being merely mythological creatures unicorns are a regular feature in business and finance in fact there are more than 1 200 unicorns around the world perhaps more than 1 400 as of mid 2024 13 collectively they are valued at over 3 888 billion 1some familiar u s based unicorns include uber airbnb spacex palantir technologies inc pltr wework and pinterest inc pins china claims some unicorns as well including didi chuxing xiaomi china internet plus holding meituan dianping and lu com here are other unicorns worth reviewing one hot unicorn startup is nuro an autonomous vehicle delivery company that was founded by two engineers from waymo which is google s self driving car project founded in 2016 nuro became a unicorn startup after receiving a 940 million investment from softbank group which put the company s valuation at 2 7 billion nuro found its own space in the autonomous vehicle industry focusing on zero emissions local delivery vehicles since then nuro has grown and acquired other startups including ike robotics the company is now actively testing and operating fully driverless models in california and texas 10 in march 2022 nuro hit a valuation of 8 6 billion the last data publicly available 11grocery delivery app instacart was another unicorn with over 2 7 billion in funding the company was founded in san francisco in 2012 and delivers from local stores including whole foods safeway jewel osco costco and harris teeter in march 2022 the company slashed its 39 billion valuation by nearly 40 to about 24 billion the move was motivated by market conditions and the need to appeal to a better labor pool 12 the much anticipated ipo finally came on sept 19 2023 shares were valued at 30 each then popped 43 to a high of 42 95 only to close at 33 70 although the company had a target valuation of 9 3 billion in september 2023 its market cap was about 8 75 billion in june 2024 13unicorns in human resourcesthe term isn t just exclusive to the world of startups in fact it is also a common word used to describe a recruitment phenomenon within human resources hr managers may have high expectations to fill a position leading them to look for candidates with higher qualifications required for a specific job in essence they seek unicorns which creates a huge disconnect between their ideal candidate and those in the pool of people available 14for example a medium sized firm might want to recruit someone with marketing experience social media writing sales and management experience they may also seek someone who speaks three different languages while it may be cost effective to hire one person with all those skills rather than multiple employees handling the separate tasks it s often the case that those people aren t available and if they are the budget for the position may not allow for their hire in any case | |
what is venture capital | venture capital is a form of private equity financing provided by investors to startups and small businesses with a high potential for growth these investors known as venture capitalists fund young companies in exchange for equity or an ownership stake in the businesses | |
what is an ipo | an initial public offering ipo is the method of a private company offering its shares to the public for the first time and becoming a publicly traded company this event marks the transition from a privately held entity to a publicly listed company on a stock exchange the primary purpose of an ipo is to raise capital from public investors to fund further growth pay off debt or give liquidity to early investors and company founders the ipo involves several steps including selecting investment banks to underwrite the offering preparing regulatory filings with the u s securities and exchange commission setting an initial price for the shares and marketing the shares to potential investors on the ipo date the company s shares are listed on a stock exchange and public trading begins allowing any investor to buy and sell the stock | |
is amazon a unicorn company | unicorns are typically used to describe privately held startup companies with market caps of over 1 billion so amazon is not considered a unicorn company as it is public when amazon went public on may 15 1997 it raised 54 million which gave it a market cap of 438 million about 859 million in 2024 dollars which is below the 1 billion mark 1516 | |
how can i invest in a unicorn | unicorns are startup companies so unless you are a private investor or venture capitalist they don t really accept a lot of moderately sized investments however interested investors should track the growth of these unicorns if they ever decide to become public companies the bottom lineunicorns are startups whose valuations exceed 1 billion companies that reach unicorn status are usually financed by venture capitalists as major innovators and many end up going public through an ipo the company s high valuation doesn t derive from financial performance but is based on investor sentiment about the company s growth prospects since unicorns aren t publicly traded companies retail investors must wait until their shares are made available to the pubic through an ipo to invest in them | |
what is a unified managed account | a unified managed account uma is a professionally managed private investment account that can include multiple types of investments all in a single account investments may include mutual funds stocks bonds and exchange traded funds unified managed accounts are often rebalanced on a specified schedule understanding unified managed account uma the unified managed account is one of a few options a high net worth investor has for managing their assets the unified managed account is an evolution of the separately managed account which is similar in that it is a professionally managed account that is rebalanced often however separately managed accounts are typically not known for pooling multiple investments and investment vehicles with varying objectives separately managed accounts are a high net worth investment alternative usually offered by an investment manager that typically focuses on a targeted strategy managed as a separate account for the investor if an investor wanted to invest across multiple strategies they would likely have to open multiple separately managed accounts a unified managed account is often a better alternative for an investor seeking to combine multiple investments the uma removes the need to have more than one account and can combine all of an investor s assets into one account uma investors pay annual management fees based on the total assets under management aum fees drop as the aum rise investing through a unified managed accountthe same banks and brokerage firms typically offer unified managed accounts as separately managed accounts their offering has also broadened to include registered investment advisors and private wealth managers technology has been a driving factor supporting their expansion a unified managed account provider has a much greater overall fiduciary responsibility since they serve as the overseer for a multitude of investments which can include stock positions employee stock option plans third party separate account management and more uma providers work with high net worth investors to integrate all of a client s assets once the assets have been aggregated a uma provider will work with the client in a number of ways the uma provider can examine the total portfolio for a comprehensive plan uma account planning can include an overlay strategy that seeks to manage the portfolio from a targeted asset allocation diversification approach uma providers also offer investors new options with affiliated companies and products that an investor may want to invest in over time often a uma provider will analyze the portfolio to conform with modern portfolio theory given the comprehensive efficient frontier for which the combined assets create a uma provider s alternative options may help a client to align their total portfolio for risk return optimization better uma providers also offer high net worth clients more streamlined reporting on their investments with greater support for comprehensive tax planning uma providers also work with clients to determine a rebalancing schedule that fits their overall investing strategy uma standards vary by provider and investors will typically sign an agreement detailing the management of the account its fees and its allowable investments and structuring uma investors typically pay annual management fees based on total assets under management fees usually decrease with greater assets under management and can range from 1 50 annually to 3 1 | |
what is a unified managed household account umha | a unified managed household account umha is a privately managed account that consolidates multiple unaffiliated products including mutual funds etfs and individual securities this type of account allows immediate family members such as parents and children to access the account a unified managed household account allows for ease of administration for the financial institution along with greater transparency for the investing family understanding unified managed household accounts umhas unified managed household accounts umhas operate on a single integrated system this system allows a financial advisor to view various assets and product types to create performance reports in some umha programs clients can create account groups for each investment goal the system supports groupings with individual performance reports billing and statements the asset management firm where the umha is located will designate a central relationship manager for large families that have accounts located in different parts of the business often umhas are discretionary programs this means the account s financial advisor has the authority to make investing decisions as with mutual fund advisory programs the investor selects a model based on risk tolerance and goals and the firm takes care of rebalancing or even changing asset allocations altogether depending on the degree of discretion inherent in a particular program pros and cons of a umhaconsumers should be aware of both the advantages and drawbacks of consolidating accounts into a umha transparencystreamlined managementlower feessimplificationno private accountssuccess depends on managementwho should open a unified managed household account a unified managed household account is often most appropriate for high net worth individuals with a complex financial picture they are most likely to benefit from combining their disparate assets into a single account especially for the purposes of wealth management and tax planning | |
what are the fees associated with a umha | investors with a umha will typically pay an annual or quarterly fee this fee is usually a percentage of their total assets under management aum this fee will vary depending on the institution at which the account is held and may decrease as assets under management increase | |
what are the tax benefits of a umha | because all a the account holder s investments are held in a single account the account manager can make investment decisions that maximize returns while minimizing the investor s tax burden this can streamline tax planning and reduce the amount of taxes the investor ultimately owes the bottom linea unified managed household account umha combines multiple unaffiliated investment products into a single managed account it can hold assets such as securities etfs and mutual funds multiple immediate family members can access the account this structure allows for streamlined management lower fees and simplified paperwork and tax management because a umha is a managed account it will have an account manager who is responsible for rebalancing the assets in the account to ensure that it continues to meet the account holders long term goals and risk tolerance the returns generated by a umha largely depend on the skill and success of this account manager so investors should carefully choose the firm at which they plan to open a umha | |
what is a unified payments interface upi | a unified payments interface upi is a smartphone application that allows users to transfer money between bank accounts it is a single window mobile payment system developed by the national payments corporation of india npci it eliminates the need to enter bank details or other sensitive information each time a customer initiates a transaction | |
how unified payments interface upi works | the unified payments interface is a real time payment system it is designed to enable peer to peer inter bank transfers through a single two click factor authentication process the interface is regulated by the reserve bank of india rbi india s central bank it works by transferring money between two bank accounts along with a mobile platform the system is said to be a safe and secure method of transferring money between two parties and eliminates the need to transact with physical cash or through a bank the pilot system was launched in india on april 11 2016 banks across the country started to upload their interface in aug 2016 upi uses existing systems such as immediate payment service imps and aadhaar enabled payment system aeps to ensure seamless settlement across accounts it facilitates push pay and pull receive transactions and even works for over the counter or barcode payments as well as for multiple recurring payments such as utility bills school fees and other subscriptions in 2021 940 billion was transacted over upi and in 2022 the average monthly transaction count was more than six billion once a single identifier is established the system allows mobile payments to be delivered without the use of credit or debit cards net banking or any need to enter account details this would not just ensure greater safety of sensitive information but connect people who have bank accounts via smartphones to carry out hassle free transactions overall upi implies fewer cash transactions and potentially reduces the unbanked population sending money vs receiving moneysending money on the upi is called a push in order to send money the user logs into the interface and selects the send money payment option after entering the recipient s virtual id and the amount desired they choose the account from which the money will be debited the user then enters a special personal identification number pin and receives a confirmation receiving money through the system is called a pull once the user has logged in to the system they select the option to collect money the user then needs to enter the virtual id for the remitter the amount to be collected and the account in which they will deposit the funds a message then goes to the payer with the request to pay if they decide to make the payment they enter their upi pin to authorize the transaction once the transfer has been completed both the sender and the recipient receive a confirmation by text message to their smartphones services offered by upia number of key features are offered by upi users can access balances and transaction histories along with sending and receiving money to send money users need an account number the indian financial system code or ifsc which is an alphanumeric code that facilitates electronic transfers the mobile number of the recipient and a virtual id or aadhaar number which is like a social security number | |
is upi available in the u s | yes upi is available in the u s you are able to send money to india from the u s using upi you need the upi id of the receiver and can use a variety of banking apps such as wise world remit and remitly | |
which upi systems can you use in india | the upi systems that you can use in india consist of many banking payment apps that allow you to use upi these include phonepe google pay axis pay and bhim | |
is upi safe in india | yes upi is safe in india it is regulated by india s central bank the reserve bank of india the bottom linethe unified payments interface upi in india is a regulated smartphone tool that allows for mobile payments to be made without debit or credit cards the upi has made paying for transactions easier and simpler facilitating economic movement within the country | |
what is the unified tax credit | the unified tax credit or unified transfer tax is available to all u s taxpayers by the internal revenue service irs and combines two separate lifetime tax exemptions for gift and estate taxes the combined exemption limit applies to taxable gifts you make to others during your lifetime inter vivos gifts and assets you leave to beneficiaries as testamentary transfers understanding the unified tax creditindividuals who give substantial assets to another while living may face gift taxes assets left for beneficiaries after death may be subject to estate taxes the unified tax credit sets an amount that individuals can gift during their lifetime and bequeath to heirs before any gift and estate taxes apply 23the donor is responsible for paying the gift tax however the recipient may agree to pay the tax instead if you are considering this type of arrangement contact a tax professional for guidance 2the unified tax credit rolls the gift and estate tax exclusions into one tax system and decreases the individual s or estate s tax bill dollar for dollar an individual or couple who gifts some of their assets may need to file a gift tax return if the value of the assets is higher than the annual exclusion amount gifts made to charities or to pay another person s medical or tuition expenses are exempt from gift tax return requirements 4annual gift tax exclusionmost taxpayers can gift up to 17 000 in 2023 and 18 000 in 2024 without notifying the irs the annual exclusion is per person so married couples filing jointly can gift up to 34 000 in 2023 or 36 000 in 2024 without filing a gift tax return if you give more than 17 000 in 2023 you must disclose the gift on form 709 doing so doesn t necessarily mean you will owe taxes on the amount but the value over 17 000 may count against your lifetime exemption 516several types of transfers aren t subject to gift tax requirements according to the irs a gift is any transfer to an individual either directly or indirectly where full consideration measured in money or money s worth is not received in return 7federal estate tax ratesthe 2023 federal tax law applies the estate tax above 12 92 million individuals can pass 12 92 million to their heirs and couples can transfer twice that without paying tax for 2024 the exemption is 13 61 million for individuals and 27 22 million for married couples filing jointly 13only a percentage of estates in the u s are worth more than these exemption thresholds for those that are federal estate tax rates apply to any amount above the exemption thresholds the federal estate tax maxes out at 40 for taxable amounts above 1 million 8 here s a look at how the tax accumulates as the taxable amount increases source internal revenue service9unified credits and probatethe probate process can be expensive so some people use the unified tax credit to save on estate taxes after their deaths the credit is not used for reducing gift taxes during the individual s lifetime but instead used on the inheritance amount bequeathed to beneficiaries after death to take advantage of this lifetime credit beneficiaries or the decedent s estate executor must complete irs form 706 which is used to determine the estate tax imposed by chapter 11 of the internal revenue code irc 10taxpayers can use the unified tax credit before or after death or both keep up on the annual gift exclusion and gift and estate tax exemption since tax laws change periodically | |
what is the gift tax exclusion for 2023 and 2024 | for 2023 the exclusion is 17 000 and 18 000 in 2024 1 the annual amount you can gift to a spouse who is not a u s citizen is 175 000 in 2023 and 185 000 in 2024 11 | |
what is the gift and estate tax exemption for 2023 and 2024 | for 2023 the exemption is 12 92 million or 25 84 million if you re married and filing jointly for 2024 the exemptions are 13 61 million and 27 22 million respectively 1 | |
which states have an estate tax | in addition to the federal estate tax imposed on all states 12 states and the district of columbia impose state estate taxes at 20 hawaii and washington have the highest top estate tax rates illinois maryland massachusetts minnesota new york oregon rhode island vermont and the district of columbia have a top tax rate of 16 connecticut and maine share the lowest tax rate 12 12the bottom linethe unified tax credit is available to all u s taxpayers by the irs and combines two separate lifetime tax exemptions for gift and estate taxes the combined exemption limit applies to taxable gifts you make to others during your lifetime and assets you leave to beneficiaries most taxpayers can gift up to 17 000 in 2023 and 18 000 in 2024 without notifying the irs but thresholds may change annually taxpayers can use the unified tax credit before or after death or both | |
what is the uniform bank performance report ubpr | the uniform bank performance report ubpr is an analytical tool created by the federal financial institutions examination council ffiec to help supervise and examine financial institutions the ubpr serves as an analysis of the impact that management and economic conditions can have on a bank s balance sheet it examines liquidity adequacy of capital and earnings and other factors that could damage the stability of the bank understanding the uniform bank performance report ubpr the uniform bank performance report summarizes the effect of economic conditions and management decisions on the performance of a given bank and the composition of that bank s balance sheet the data therein can be used to evaluate whether the bank is earning enough money and has enough liquid assets it can also be used to manage the bank s growth assets and liabilities the ubpr is a valuable tool for bankers and bank examiners seeking to understand the financial condition of a given bank and as such can be used to maintain the financial fitness of a bank or to restore it to good condition 1banks traditionally rely heavily on short term deposits to fund long term loans to consumers and businesses this reliance makes a bank susceptible to major problems if conditions turn against it or it sees a sudden mass withdrawal of deposits it is why the ffiec tries to monitor banks stability with the ubpr ubpr delivery schedulea given bank s ubpr will usually be published within 24 hours of filing the associated call report with the central data repository however if there are errors in the associated call report then the ubpr won t be published until those errors are rectified 2 ubpr recalculation schedulethe data in a given bank s ubpr is updated on a continuous basis data for the current quarter s ubpr is recalculated each night and published each morning data for the current quarter and the four consecutive previous quarters is recalculated every friday night and published the next saturday morning a 21 period recalculation is done once per quarter it occurs two weeks before banks start submitting their new call reports the recalculated data is published within a three day period 2 once most banks have filed their call reports and ubpr data has been calculated peer group average data is published peer group averages for all peer groups but 1 and 2 are published 30 days after the date a call report is filed or on the due date of the call report peer group average data for groups 1 and 2 is published 35 days after the date a call report is filed or on the date the call report is due 2 | |
what is a uniform bill of lading | a uniform bill of lading is a standardized agreement between an exporter and a carrier regarding the items or property to be transported the uniform bill of lading provides a boilerplate language for the basic information about a shipment such as the shipper and recipient s names and the shipment s origin and destination in addition the document establishes the terms of the carrier s liability transport time frame how to file a claim for a lost or damaged shipment how insurance will be applied in the event of a claim and how the shipment may be stored or disposed of if the shipment is refused or is not deliverable understanding a uniform bill of ladingthe uniform bill of lading also specifies the carrier s liability with regard to specific types of shipments including documents coin money items of extraordinary value and explosives additional shipment charges may be assessed if the shipper misrepresents the type of goods being transported while the uniform bill of lading is the standard template other variations also exist including the inland bill of lading ocean bill of lading negotiable bill of lading and through bill of lading the bill of lading also represents proof of delivery when the goods are delivered to the destination and signed for by the receiver these statements reflect either the shipper s representations to the carrier of the terms of the service or the carrier s notes from its own inspection of the goods if the bill of lading notes the defective condition of the goods or their packaging it is considered claused or fouled if no defects are noted it is considered a clean bill of lading the bill of lading states that the carrier is responsible for loss damage delay and liability in the transportation of the goods for shippers from the time the carrier receives the goods until delivery is complete the carriers are responsible for the full actual loss if the receiver finds the freight damaged or unacceptable the bill of lading can be used as a legal document to dispute the delivery of goods in accordance with the provisions of title 49 of the code of federal regulations section 1005 section 14706 and the carmack amendment changes in the uniform bill of ladingchanges were made to the uniform bill of lading that came into effect in august 2016 the new standard imposed liability only for carriers shown as transporting the property on the bill of lading when damages occur the new rules also changed the time requirements for carriers to complete deliveries according to inbound logistics the new bill extended the delivery time from reasonable periods to within the regular course of providing transportation services | |
what is the uniform commercial code ucc | the uniform commercial code ucc is a standardized set of regulations for conducting business and financial transactions in any state in the u s it is not a federal statute but a state law that has been adopted by all 50 states and the district of columbia the uniform commercial code was established in 1953 to ease the complexities of doing business across state lines given the various state laws then in effect 1the ucc provides a legal and contractual framework for doing business across states although there are slight variations from state to state the ucc consists of nine articles governing various types of transactions including banking and loans | |
how the uniform commercial code ucc works | if you ve ever purchased a business or a vehicle chances are you signed a ucc 1 statement the title remains in the lender s possession until the loan is paid off the policies instituted under the uniform commercial code ucc are largely focused on the activities of small businesses and entrepreneurs part of the intent is to clear up confusion over how each state might separately regulate such operations although the ucc code regulates dealings involving personal property it does not govern real property such as land or structures attached to land the ucc code imposes standards for processing checks and other types of commercial paper often it is applied to the property secured by a bank where the title is held until the borrower pays off the balance of the financing companies that conduct business transactions outside of their home state must comply with the applicable ucc law including when leasing equipment selling goods borrowing money and establishing contracts 1ucc articleseach of the nine articles in the code addresses a distinct issue article 1 general provisions establish definitions and certain parameters for how the uniform commercial code ucc is to be applied it was last updated in 2001 article 2 2a the sale of goods excluding real estate and service contracts article 2a covers leases of personal property article 3 checks drafts and other negotiable instruments such as a note a promise to pay money an item is considered negotiable if it can be transferred to another individual and still be enforceable against the original payer article 4 4a bank deposits and collections which covers rules for check processing and automated inter bank collections article 4a focuses on fund transfers article 5 letters of credit issued by a bank for trade facilitation article 6 bulk sales auctions and liquidations of assets most states believe this article to be obsolete the uniform law commission ulc has recommended its repeal and most states have done so article 7 documents of title including warehouse receipts bulk sales and bills of lading bol article 8 investment securities specifically the holding of securities through intermediaries article 9 secured transactions of personal property agricultural liens promissory notes consignments and security interests 1the uniform commercial code ucc undergoes frequent revisions to address specific issues history of the uccthe uniform commercial code ucc was created by private organizations including the uniform law commission ulc which is also known as the national conference of commissioners on uniform state laws nccusl and the american law institute ali 1the ulc was established in 1892 to standardize commercial law the organization established a variety of laws from its founding up until the 1950s in the 1950s along with the ali the ulc compiled all the commercial laws into one set of commercial codes for states to follow 1the ucc was presented to the states in 1951 with pennsylvania being the first to adopt the ucc in 1953 and other states adopting it over time louisiana is the only state that has not fully ratified the code though it has adopted part of it 1special considerationseach state has the option of adopting the code as it is written or adopting and modifying provisions of it louisiana did not adopt article 2 of the uniform commercial code ucc as written the state also did not adopt article 2a which covers the lease and rental of personal property not regarded as real estate 2california has made some modifications as well implementing its own version of the ucc laws the regulation of real estate contracts is an exception to california s adoption of the ucc state laws regulating the purchase of real estate such as a warehouse are covered by other state real estate regulations 3service contracts in california do not follow ucc rules contracts for auto repairs and painting jobs are covered by the state s insurance laws not the ucc 3who does the uniform commercial code protect the uniform commercial code ucc was established to protect all individuals engaged in a business transaction it was created to standardize commerce across the states | |
what does the uniform commercial code article 2 and 2a cover | uniform commercial code article 2 covers the sale of goods excluding real estate and service contracts article 2a covers leases of personal property | |
how does a ucc lien work | a ucc lien also known as a ucc filing is a form that a creditor files to provide notice that they have an interest in the property of a debtor whether that property is personal or business the overall purpose of a ucc lien is to allow a creditor to claim collateral on financing with a debtor the creditor will have the right to the property if the debt is not repaid the bottom linethe universal commercial code assures both parties in a financial transaction that a check a lease or a cash transfer is handled pretty much the same in any state in the u s it was designed to remove barriers to business across states | |
what is the uniform consumer credit code uccc | the uniform consumer credit code uccc is a draft law adopted by 11 states that governs consumer credit transactions it establishes rules related to the issuance and use of all types of credit products from credit cards to mortgages the code is intended to protect consumers from fraud and unfair practices on the part of lenders | |
how the uniform consumer credit code uccc works | the uniform consumer credit code was approved by the national conference of commissioners on uniform state laws in 1968 and revised in 1974 1 the code is not in itself a federal or state law but states may use it in order to write consistent consumer credit laws although it s not if effect nationally the code has been adopted by 11 states colorado idaho indiana iowa kansas maine oklahoma south carolina utah wisconsin and wyoming2 with other states incorporating at least some of its provisions into their laws one of the most significant guidelines in the uccc is the limitation on interest rates charged by lenders however the actual ceilings on rates vary according to the type of credit issued the code also encourages lower interest rates by limiting barriers to entry in the consumer credit field the codes do this on the theory that more competition will result in lower consumer interest rates beyond protection from usury the illegal lending of money and charging of unreasonably high fees many of the guidelines concern the establishment of fair contracts issued to consumers by lenders for instance the code prohibits the use of waiver of defense clauses in lending a waiver of defense clause states that a borrower relinquishes the right to any legal defense in the event of a conflict with the lender such provisions allow a lender to receive a summary judgment against a borrower with no opportunity for protection in either court or arbitration the code also limits so called unconscionable transactions what constitutes an unconscionable transaction can be subject to interpretation but it typically involves negotiations that are so overwhelmingly one sided as to be deemed unenforceable these unilateral practices may include warranty disclaimers or the blatant misrepresentation of products federal law has superseded some of the code s guidelines one example is restrictions on aggressive collection practices which are now governed by the fair debt collection practices act fdcpa another is the original guideline on disclosure of loan terms the truth in lending act tila now contains those rules history of the uniform consumer credit code uccc as mentioned above the uccc was established in 1968 as a way to protect consumers from predatory and questionable credit transactions amendments were made in 1974 to update the code as the financial industry and legal landscape were changing for example credit cards were a relatively new type of consumer credit when the first version of the code was written but with the increase in credit card usage the current uccc guidelines have proven crucial to safeguarding consumers one primary directive says the bank issuing a credit card is also subject to the claims of a cardholder against a merchant as new technologies and systems become available and the financial landscape changes certain services remain exempt from the uccc as an example income share agreements isas introduced by purdue and other by universities have not been subject to the uccc under such agreements an educational institution takes on a portion of the student s expenses in exchange for a share of their future income the uccc was developed by the national conference of commissioners on uniform state laws also known as the uniform law commission the commission was created in 1892 to help states draft laws on subjects on which uniformity across the states is desirable and practicable more than 300 commissioners all of whom are lawyers are appointed by the 50 states the district of columbia puerto rico and the u s virgin islands 3to date the commission has been responsible for more than 300 uniform acts including the uccc and the uniform commerical code ucc 4 the ucc is a set of laws and regulations meant to help standardize business transactions between entities in different states the code was established in 1952 in response to the problems companies faced doing business across state lines now adopted universally by all states the ucc provides legal guidelines and standards that govern transactions such as banking and lending other uniform acts developed by the commission cover a variety of legal matters including family and domestic law real estate probate commercial law dispute resolution trusts and estate law | |
how are commissioners appointed to the uniform law commission | according to the uniform law commission each jurisdiction determines the method of appointment and its number of commissioners in most states the governor appoints the state s commissioners to serve a specified term in a few states ulc commissioners serve at the will of the appointing authority and have no specific term it adds that ulc commissioners are volunteers who do not receive salaries or other compensation for their public service 4 | |
what s the difference between a uniform code and a model act | uniform codes or uniform laws are drafted by the uniform law commission and may be adopted by state legislatures partially or in their entirety model acts can be drafted by anyone they are rarely enacted in their entirety but serve as guidelines 5 the uniform law commission has also drafted model acts 6 | |
what federal laws protect credit card holders | credit card holders are protected by a number of federal as well as state laws the most recent major law on the federal level is the credit card accountability responsibility and disclosure act of 2009 also known as the card act which amended the truth in lending act its provisions include clearer disclosure of credit terms and limits on the fees that lenders can charge 7the bottom linethe uniform consumer credit code uccc establishes legal rules to protect consumers who use credit in the states where it has been enacted it works in conjunction with a variety of federal laws with the same aim | |
what is uniform distribution | in statistics uniform distribution refers to a type of probability distribution in which all outcomes are equally likely probability distributions can help you decide the probability of a future event uniform distribution for a deck of cards is expected because the likelihood of drawing a heart a club a diamond or a spade is equally likely a coin also has a uniform distribution expectation because the odds of getting either heads or tails front or back of the coin in a coin toss are the same a uniform distribution can be visualized as a straight horizontal line for a coin flip heads or tails each has a probability of occurring 50 of the time p 0 50 and would be plotted on a chart with a line from the y axis at 0 50 understanding uniform distributionthere are two types of uniform distributions discrete and continuous the possible results of rolling a die provide an example of a discrete uniform distribution it is possible to roll a 1 2 3 4 5 or 6 but it is not possible to roll a 2 3 4 7 or 5 5 therefore the roll of a die generates a discrete distribution with the probability of 1 6 for each outcome there are only 6 possible values to return and nothing in between the possibilities are finite on the other hand continuous uniform distributions have infinite distribution possibilities an idealized random number generator would be considered a continuous uniform distribution with this type of distribution every point in the continuous range between 0 0 and 1 0 has an equal opportunity of appearing yet there is an infinite number of points between 0 0 and 1 0 there are several other important continuous distributions such as the normal distribution chi square and student s t distribution there are also several data generating or data analyzing functions associated with distributions that help explain the variables and their variance within a data set these functions include probability density function cumulative density and moment generating functions the term discrete in statistics refers to variables with singular countable and limited possible values visualizing uniform distributionsa distribution is a simple way to visualize a set of data it can be shown either as a graph or a list and reveals which values of a random variable have lower or higher chances of happening the uniform distribution is perhaps the simplest of all probability distributions in a uniform distribution each value in the set of possible values has the same possibility of happening when displayed as a bar or line graph this distribution has the same height for each potential outcome in this way it can look like a rectangle and therefore is sometimes described as the rectangular distribution if you think about the possibility of drawing a particular suit from a deck of playing cards there is a random yet equal chance of pulling a heart as there is for pulling a spade that is 1 4 or 25 the roll of a die yields one of six numbers 1 2 3 4 5 or 6 because there are only 6 possible outcomes the probability of you landing on any one of them is 16 67 1 6 when plotted on a graph the distribution is represented as a horizontal line with each possible outcome captured on the x axis at the fixed point of probability along the y axis example of uniform distributionthere are 52 cards in a traditional deck of cards also in that deck are four suits hearts diamonds clubs and spades each suit contains an a 2 3 4 5 6 7 8 9 10 j q k the deck contains 2 jokers as well however we ll ignore the jokers and face cards for this example and focus only on number cards replicated in each suit as a result we are left with 40 cards a set of discrete data suppose you want to know the probability of pulling a 2 of hearts from the modified deck the probability of pulling a 2 of hearts is 1 40 or 2 5 each card is unique therefore the likelihood that you will pull any one of the cards in the deck is the same now let s consider the likelihood of pulling a heart from the deck the probability is significantly higher why we are now only concerned with the suits in the deck since there are only four suits pulling a heart yields a probability of 1 4 or 25 the plotted results from rolling a die will be discretely uniform whereas the plotted results averages from a roll of dice more than one die will be normally distributed uniform distribution vs normal distributionsome of the most common probability distributions are perhaps one of the most familiar and widely used is the normal distribution often depicted as a bell curve normal distributions show how continuous data is distributed and depict most of the data as concentrated on the mean or average in a normal distribution the area under the curve equals 1 and 68 27 of all data falls within 1 standard deviation how dispersed the numbers are from the mean 95 45 of all data falls within 2 standard deviations from the mean and approximately 99 73 of all data falls within 3 standard deviations from the mean 1 as the data points move away from the mean the frequency of data occurring decreases discrete uniform distribution shows that variables in a range have the same probability of occurring there are no variations in probable outcomes and the data is discrete rather than continuous its shape resembles a rectangle rather than the normal distribution s bell like a normal distribution however the area under the graph is equal to 1 | |
what does uniform distribution mean | uniform distribution is a probability distribution that asserts that the outcome possibilities for a discrete set of data are the same for each value | |
what is the formula for uniform distribution | the formula for a discrete uniform distribution ispx 1nwhere px probability of a discrete valuen number of values in the range begin aligned p x frac 1 n textbf where p x text probability of a discrete value n text number of values in the range end aligned px n1 where px probability of a discrete valuen number of values in the range | |
is a uniform distribution normal | no a uniform distribution is not normal normal which refers to the way data is distributed about the mean shows that the probability of a variable occurring around the mean is higher than for a variable occurring far away from the mean the occurrence probability is not uniform with normal data whereas it is constant with a uniform distribution | |
what is the expectation of a uniform distribution | the expectation with a uniform distribution is that all possible outcomes have the same probability the probability for one variable is the same as that for another the bottom lineuniform distribution is one of several different examples of probability distributions used in statistics a uniform distribution is one where all possible outcomes are finite and equally likely to occur for example the roll of a single die presents just six possible results and each result has a chance of taking place | |
what is the uniform gifts to minors act ugma | the uniform gifts to minors act ugma allows individuals to give or transfer assets to underage beneficiaries the act which was developed in 1956 and revised in 1966 is commonly used to transfer assets from parents to their children 1 the amount is free of gift tax up to a certain amount the assets are usually placed in ugma accounts on behalf of minors eliminating the need for an attorney to establish a special trust fund ugma funds are also subject to special tax treatment investopedia mira norian | |
how a ugma account works | a ugma account functions as a type of custodial account it is designed to hold and protect assets for the beneficiary the donor can appoint themselves another person or a financial institution in the role of custodian the custodian has the authority to buy stocks bonds mutual funds and other securities on behalf of the minor 2ugma accounts can be opened through a bank or brokerage institution friends and family can make contributions to the accounts which carry no contribution or income limits contributions are made with after tax dollars which means donors don t receive an income tax deduction deposits are irrevocable this means that they become permanent transfers to the minor and the minor s account so the transfer cannot be reversed 3ugma assets are typically used to fund a child s education but the donor can make withdrawals for just about any expenses that benefit the beneficiary there are no withdrawal penalties however because ugma assets are technically owned by the minor they do count as assets if they apply for federal financial aid for college possibly decreasing their eligibility 4once they reach the age of majority in their state minors are granted full access to their ugma account at that point they may use the funds as they please 1custodians have a fiduciary duty to manage the account in the beneficiary s best interest 5special considerationsthe minor or beneficiary is considered the owner of all assets in a ugma account and the income they generate for tax purposes but the earnings can be taxed either to the child or the parent reporting requirements depend on the amount of income the account generates and the beneficiary s age a ugma can affect a donor s lifetime gifting limits for tax purposes should a donor who acts as the custodian die before the custodial property is transferred to the minor the entire custodial property is included in the donor s taxable estate up to 16 000 per individual can be contributed free of gift tax for the calendar year 2022 this amount increases to 17 000 for the 2023 tax year 6uniform gifts to minors act ugma vs uniform transfers to minors act utma the terms ugma and uniform transfers to minors act utma are usually used interchangeably in fact the utma which was established in 1986 is an extension of the ugma 1 there are some unique similarities between the two in that they both require that donors name a custodian this individual manages and invests the assets until the beneficiary comes of age and both contend that any assets belong to the minor once gifted having said that there are some distinctions between the ugma and utma custodial accounts set up under the utma can contain any kind of tangible or intangible asset including real estate works of art and intellectual property in contrast ugma accounts are limited to financial assets such as cash stocks bonds and insurance products policies annuities 1the utma allows children to take advantage of investing without having any associated tax burdens the gift tax exclusion provided by the internal revenue service irs was up to 16 000 per person for 2022 17 000 for 2023 for a qualifying gift including gifts to minors 6ugma vs 529 plansas noted above ugma accounts come with no withdrawal penalties this means that accounts can be used to pay for various expenses including the costs to fund an education but there is another type of account that parents can use to save for their children s studies notably the 529 plan a 529 plan is a tax advantaged savings account that is intended solely for qualified educational expenses including tuition equipment and certain living costs originally meant for just postsecondary education parents can now use 529 plans for any qualified education expenses beginning in kindergarten it also covers apprentice program expenses 7here s how they work anyone can open an account including parents and grandparents unlike ugma accounts there are contribution limits for 529 plans which vary by state the limits tend to be very high so many parents don t have to worry about hitting the ceiling the money invested in a 529 plan is allowed to grow on a tax deferred basis any withdrawals made from the account are tax free provided they are used for qualified education expenses 529 plans come in two different types ugmas are usually limited to publicly traded financial assets which means they cannot invest in speculative instruments like derivatives or buy on margin advantages and disadvantages of ugmathere are a number of benefits and drawbacks that come with using the ugma to help save for a minor s future we ve listed some of the most common below one of the main benefits of having ugma accounts is that they re simple easy to understand and very easy to set up you can do so through a financial institution or a brokerage firm and they can be set up by anyone including family or friends ugma accounts come with no contribution limits just keep in mind that there is a gift tax imposed by the irs which does place caps on how much individuals can set aside as a gift to others similarly there are no withdrawal limits or restrictions this means that money can be taken out at any time and for whatever reason 3there is more flexibility when it comes to how you can use a ugma account unlike other plans you aren t limited to using the funds or assets for things like education one of the biggest advantages is that they allow parents and others to skip the trust process the assets placed within a ugma account automatically become the property of the minor which means there s no question of ownership all ugma accounts are irrevocable as such once you transfer assets to the account they become the property of the minor and are no longer yours 3 this means that you can t change your mind so once the transfer is complete it s there for good ugmas can be used against the beneficiary if they want to get any type of financial aid in the future including student loans that s because they re considered the child s property if the value of the account is fairly substantial it may decrease the amount of aid they may receive if they get any at all 4there are no tax benefits to owning a ugma account the irs doesn t allow any tax credits or tax deductions for setting aside money in a child s ugma like it would for a 529 plan easy to understand and set upno contribution and no withdrawal limitsprovides more flexibilityskips the trust processirrevocablemay change or eliminate eligibility for financial aidno tax advantagescontribution limits and taxesas noted above there are no actual limits to how much you can contribute to a ugma account but there is an important consideration when it comes to these types of accounts anything you contribute to your child s ugma account may be considered a gift the irs puts caps on how much anyone can gift another individual for 2022 parents can gift as much as 16 000 to their children without any tax consequences that amount was adjusted for inflation for the 2023 tax year to 17 000 6but what about taxation under certain circumstances parents may report their children s ugma accounts on their own tax returns and take advantage of the kiddie tax or the tax on a child s investment and other unearned income this means that parents can report their child s income on their own tax return if the child s unearned income including ugma earnings was less than 2 300 in 2022 2 500 in 2023 and they were no older than 19 or 24 if a full time student 89in this case the first 1 150 of the child s unearned income is treated as tax free increasing to 1 250 in 2023 1011 the next 1 150 is taxed at the child s tax rate anything exceeding 2 300 is taxed at the parent s tax rate if such an election is not made or if the child s unearned income exceeded 2 300 at the end of the tax year the minor would have to file a tax return subject to kiddie tax rules 8 | |
how are gifts to minors taxed | financial gifts in the amount of up to 16 000 in 2022 are exempt from taxes this increases to 17 000 in 2023 gifts in any amount over this amount per year will be taxed 6 | |
what is a downside to the uniform gifts to minors act | as the assets in a ugma account are owned by the minor this can reduce the amount of financial aid they may receive if the balance of the ugma account is too high it may disqualify them completely from any financial aid this is true even if they haven t reached the age of majority and can t access the account until a certain date | |
where can i open a uniform gifts to minors account | a uniform gifts to minors account is an easy to understand vehicle that can be opened at a brokerage institution or a bank anyone can contribute assets to these accounts one thing that depositors should remember is that whatever they put into the accounts becomes irrevocable and the property of the beneficiary the bottom linethere are many ways that parents and others can help secure the financial futures of their children or other minors the uniform gifts to minors act provides one way to do so ugma accounts are easy to open and understand and allow individuals to contribute cash and other assets to a single underaged beneficiary they are designed to be very flexible because individuals can use them for any purpose but there are a few caveats to these types of accounts that parents should understand there are no tax benefits and deposits become irrevocable as soon as they re made if you re unsure of whether this type of account is right for your beneficiary make sure you consult a financial professional to help guide you | |
what is a uniform individual accident and sickness policy provisions act | a uniform individual accident and sickness policy provisions act is legislation that every u s state has passed into law in some form it stipulates that individual health insurance policies must contain certain provisions in order to be valid 1 understanding the uniform individual accident and sickness policy provisions actthe legislation was was created to establish a standard of quality and to ensure health insurance policies have an adequate level of coverage by requiring that certain provisions be written into every policy it was written by the national association of insurance commissioners naic a non governmental organization that is comprised of the insurance commissioners of every state and territory 2 the naic is not itself a regulator insurance markets are regulated at the state level mandatory uniform policy provisionsthe 12 mandatory provisions include the rights and obligations of both the insurer and the insured among the burdens that fall on the insurer are the need to include any relevant information within the original policy or official amendments the requirement of a stated grace period for delinquent premium payments and instructions for reinstatement of a policyholder who misses that grace period the provisions that cover the responsibilities of the policyholder include requirements that they notify the insurer of a claim within 20 days of a loss provide proof of the extent of that loss and update beneficiary information when changes take place 1 optional uniform policy provisionsafter the 12 mandatory provisions insurers may include any of 11 optional clauses in a policy the policyholder and the insurer can negotiate which of these provisions will be part of the policy but generally the insurer will have the final say the 11 optional provisions tend to place more of a burden on the insured to comply with certain requirements than on the insurer these requirements include the obligation to inform the insurer of changes in income especially if due to a disability or changes to a more or less dangerous occupation the optional clauses also state that any misstatements regarding age use of illegal substances or engagement in illegal occupations will have an adverse impact on the insured s ability to collect on claims otherwise covered by a policy 1 |
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