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how are nonparametric statistics applied | because nonparametric statistics make fewer assumptions about sample data they are more widely applied and easily used than parametric statistics however nonparametric testing is less efficient in cases where parametric testing is more appropriate the reason is that nonparametric statistics discard some information that is available in the data unlike parametric statistics the bottom linenonparametric statistics are a statistical method in which the data are not assumed to come from prescribed models that are determined by a small number of parameters such as the normal distribution model and the linear regression model nonparametric statistics sometimes use ordinal data meaning it relies not on numbers but on a ranking or order | |
what are nonpassive income and losses | nonpassive income and losses constitute any income or losses that cannot be classified as passive nonpassive income includes any active income such as wages business income or investment income nonpassive losses include losses incurred in the active management of a business nonpassive income and losses are usually declarable and deductible in the year incurred understanding nonpassive income and lossesactivities that include the taxpayer s material participation in the effort that result in losses or income may be classified as nonpassive according to the internal revenue service the tests for nonpassive versus passive are rooted in the time spent and actions performed in the pursuit of the revenue the losses or income may qualify as nonpassive if the taxpayer annually and actively participates for more than 500 hours in the business venture that requirement falls to 100 hours if no other partner or co worker puts in more work hours towards the venture than the taxpayer during the year this does not include however serving as a manager of the business if another manager is fulfilling those same duties furthermore owning a business yet putting in work hours only for the sake of claiming material participation might not meet the criteria of the irs for nonpassive there are other types of income that can qualify as nonpassive income derived from investment portfolios can receive this classification that can include dividends proceeds of the sale of investments and interest compensation paid for the destruction or theft of property is considered nonpassive sources of retirement income such as deferred compensation and social security may also be included as nonpassive just as income from these sources must be reported any losses associated with these activities can be deducted from the taxpayer s taxes this also includes general partnerships that have the responsibility to oversee the day to day operations of a business nonpassive losses that general partners face may in turn affect the business they are managing as they may attempt to sell or its assets to address their losses this could in turn lead to the closure of the business examples of nonpassive revenuehere are some specific examples of nonpassive revenue examples of nonpassive losseshere are specific examples of nonpassive losses | |
when an individual is an owner of an interest in a partnership or s corporation they re issued a schedule k 1 that individual has to determine whether their stake is passive or nonpassive | the irs and nonpassive activitythe irs defines passive income specifically for tax purposes distinguishing it from general usage true passive income activities include trade or business activities where the taxpayer does not materially participate and rental activities unless the taxpayer is a real estate professional 1to determine whether an income is passive or nonpassive you usually need to determine material participation the irs provides seven tests to define material participation such as participating in an activity for more than 500 hours a year or having substantial involvement in the business meeting any of these tests means the income is nonpassive and should be reported accordingly to the irs almost all real estate activities are generally considered passive unless the taxpayer qualifies as a real estate professional by meeting specific participation requirements temporary rentals like airbnb may be classified differently based on the services provided and rental duration 1for tax purposes spouses participation counts toward material participation and passive losses can only offset passive income with excess losses carried forward to future years passive income is typically taxed at the individual s marginal tax rate we ll also talk more about passive loss treatment later in this article reporting nonpassive income on tax returnsnonpassive income and losses are reported on your tax return depending on the source of the income if you re a business owner or self employed nonpassive income and losses are typically reported on schedule c profit or loss from business this form details your business income and expenses wages salaries and other forms of employment income are reported on form w 2 which your employer provides at the end of the year this form shows the total amount of nonpassive income earned as well as taxes withheld social security contributions and other relevant information if you have multiple sources of nonpassive income you can combine these amounts when calculating your total taxable income nonpassive losses are reported similarly and can offset nonpassive income reducing your taxable income for instance if your business has more expenses than it earns in revenue you d have a net loss this loss can be deducted from your other nonpassive income passive activity losses and tax treatmentthough this article is about nonpassive income it s important to highlight passive activity losses this is the crux of why it is important at least for tax reasons to be able to distinguish between passive and nonpassive activity the irs generally restricts the use of passive activity losses pals to offset only passive income this means that losses from passive activities cannot be used to reduce nonpassive income such as wages salaries or income what we listed above in this article if passive losses exceed passive income in a given year the excess losses cannot be deducted from nonpassive income instead these excess losses are carried forward to future tax years where they can be used to offset future passive income | |
what are the tax implications of nonpassive revenue | nonpassive revenue is subject to regular income tax rates and often additional self employment taxes if the income is from a business or freelance work unlike passive income which may have preferential tax treatments in certain cases nonpassive revenue is taxed based on the individual s or entity s active earnings | |
how do i convert passive income to nonpassive revenue | converting passive income to nonpassive revenue involves increasing your active involvement in the income generating activity for instance if you have a rental property you could offer additional services such as property management or maintenance | |
what are the tax implications of nonpassive losses | nonpassive losses can be deducted against other types of income which can reduce the overall taxable income for an individual or business | |
what industries typically experience high nonpassive losses | industries that typically experience high nonpassive losses include startups technology and hospitality these industries often require significant upfront investments face intense competition and are subject to market volatility the bottom linenonpassive income is earned through active participation in activities like employment or running a business nonpassive losses are incurred from these same activities and can be used to offset nonpassive income reducing taxable income it s important for tax reasons you know the difference whether something is nonpassive or passive | |
what is a nonperforming asset | a nonperforming asset npa is a debt instrument where the borrower has not made any previously agreed upon interest and principal repayments to the designated lender for an extended period of time the nonperforming asset is therefore not yielding any income to the lender in the form of interest payments breaking down nonperforming assetfor example a mortgage in default would be considered nonperforming after a prolonged period of non payment the lender will force the borrower to liquidate any assets that were pledged as part of the debt agreement if no assets were pledged the lender might write off the asset as a bad debt and then sell it at a discount to a collections agency banks usually categorize loans as nonperforming after 90 days of nonpayment of interest or principal which can occur during the term of the loan or for failure to pay principal due at maturity for example if a company with a 10 million loan with interest only payments of 50 000 per month fails to make a payment for three consecutive months the lender may be required to categorize the loan as nonperforming to meet regulatory requirements a loan can also be categorized as nonperforming if a company makes all interest payments but cannot repay the principal at maturity the effects of npascarrying nonperforming assets also referred to as nonperforming loans on the balance sheet places three distinct burdens on lenders the nonpayment of interest or principal reduces cash flow for the lender which can disrupt budgets and decrease earnings loan loss provisions which are set aside to cover potential losses reduce the capital available to provide subsequent loans once the actual losses from defaulted loans are determined they are written off against earnings recovering losseslenders generally have four options to recoup some or all of the losses resulting from nonperforming assets | |
when companies are struggling to service debt lenders can take proactive steps to restructure loans to maintain cash flow and avoid classifying loans as nonperforming when defaulted loans are collateralized by assets of borrowers lenders can take possession of the collateral and sell it to cover losses to the extent of its market value | lenders can also convert bad loans into equity which may appreciate to the point of full recovery of principal lost in the defaulted loan when bonds are converted to new equity shares the value of the original shares is usually wiped out as a last resort banks can sell bad debts at steep discounts to companies that specialize in loan collections lenders typically sell defaulted loans that are not secured with collateral or when the other means of recovering losses are not cost effective | |
what is a nonperforming loan npl | a nonperforming loan npl is a loan that is in default due to the fact that the borrower has not made the scheduled payments for a specified period although the exact elements of nonperforming status can vary depending on the specific loan s terms no payment is usually defined as zero payments of either principal or interest the specified period also varies depending on the industry and the type of loan generally however the period is 90 days or 180 days investopedia julie bang | |
how a nonperforming loan npl works | a nonperforming loan npl is considered in default or close to default once a loan is nonperforming the odds the debtor will repay it in full are substantially lower if the debtor resumes payments again on an npl it becomes a reperforming loan rpl even if the debtor has not caught up on all the missed payments in banking commercial loans are considered nonperforming if the debtor has made zero payments of interest or principal within 90 days or is 90 days past due for a consumer loan 180 days past due classifies it as an npl a loan is in arrears when principal or interest payments are late or missed a loan is in default when the lender considers the loan agreement to be broken and the debtor is unable to meet the obligations types of nonperforming loans npls a debt can achieve nonperforming loan status in several ways examples of npls include the fair debt collection practices act prohibits certain abusive or deceptive practices in order to collect on nonperforming personal loans however this law only applies to third party debt collectors or debt investors not the original lender 1official definitions of nonperforming loans npls several international financial authorities offer specific guidelines for determining nonperforming loans the european central bank ecb requires asset and definition comparability to evaluate risk exposures across euro area central banks the ecb specifies multiple criteria that can cause an npl classification when it performs stress tests on participating banks the ecb has performed a comprehensive assessment and developed criteria to define loans as nonperforming if they are an addendum issued in 2018 specified the time frame for lenders to set aside funds to cover nonperforming loans two to seven years depending on whether the loan was secured or not as of 2020 eurozone lenders still have approximately 1 trillion worth of nonperforming loans on their books 3the international monetary fund imf also sets out multiple criteria for nonperforming government loans 4the imf has defined nonperforming loans as those whose nonperforming loans may damage the credit rating of the borrower making it harder and more expensive to borrow money in the future nonperforming loan npl vs reperforming loan rpl nonperforming loans are those in default reperforming loans are those that were once nonperforming and are now performing again the reperforming loans were once delinquent for at least 90 days and are now performing again reperforming loans are often loans where the borrower has filed for bankruptcy and has continued to make payments as a result of the bankruptcy agreement such an agreement generally allows the borrower to become current on their debt via a loan modification program example of a nonperforming loan npl imagine a hypothetical borrower who cannot make loan payments due to job loss after 90 days without payment the bank or lender will consider the loan nonperforming the bank would shift the loan to their nonperforming list and continue seeking payment for the debt there are multiple avenues available to the creditor one of the most common ways to collect the debt is to send it to a collections agency which will be paid a percentage of any money they recover the lender can also sell the debt to a debt buyer at a fraction of the face value although the creditor will lose money this is often a better financial choice than trying to collect on a nonperforming loan borrowers with nonperforming loans may be able to negotiate with creditors to forgive part of their debt however this may damage their credit rating making it harder and more expensive to borrow in the future | |
what happens to nonperforming loans | nonperforming loans can be sold by banks to other banks or investors the loan may also become reperforming if the borrower starts making payments again in other cases the lender may repossess the borrower s collateral the satisfy the loan balance | |
what are the causes of nonperforming loans | nonperforming loans tend to occur during economic hardships when delinquencies are high they happen when the borrower fails to make a payment for a long period of time such as 90 to 180 days | |
why do banks sell nonperforming loans | banks may sell nonperforming loans to focus on the loans that bring in money each month selling the loans at a discount may be more profitable than trying to collect money from a delinquent borrower who buys nonperforming loans other banks or distressed debt investors may consider investing in nonperforming loans as well as real estate investors | |
how do you solve a nonperforming loan | solving a nonperforming loan involves getting back on track with payments this is may be done with a loan modification agreement through the lender the bottom linethe number of nonperforming loans tends to rise during economic uncertainty these loans are the ones where borrowers do not or cannot make payments the loan goes to npl status if no payment is received for a set period of time usually 90 or 180 days depending on the lender | |
what is a nonperforming loan npl | a nonperforming loan npl is a loan that is in default due to the fact that the borrower has not made the scheduled payments for a specified period although the exact elements of nonperforming status can vary depending on the specific loan s terms no payment is usually defined as zero payments of either principal or interest the specified period also varies depending on the industry and the type of loan generally however the period is 90 days or 180 days investopedia julie bang | |
how a nonperforming loan npl works | a nonperforming loan npl is considered in default or close to default once a loan is nonperforming the odds the debtor will repay it in full are substantially lower if the debtor resumes payments again on an npl it becomes a reperforming loan rpl even if the debtor has not caught up on all the missed payments in banking commercial loans are considered nonperforming if the debtor has made zero payments of interest or principal within 90 days or is 90 days past due for a consumer loan 180 days past due classifies it as an npl a loan is in arrears when principal or interest payments are late or missed a loan is in default when the lender considers the loan agreement to be broken and the debtor is unable to meet the obligations types of nonperforming loans npls a debt can achieve nonperforming loan status in several ways examples of npls include the fair debt collection practices act prohibits certain abusive or deceptive practices in order to collect on nonperforming personal loans however this law only applies to third party debt collectors or debt investors not the original lender 1official definitions of nonperforming loans npls several international financial authorities offer specific guidelines for determining nonperforming loans the european central bank ecb requires asset and definition comparability to evaluate risk exposures across euro area central banks the ecb specifies multiple criteria that can cause an npl classification when it performs stress tests on participating banks the ecb has performed a comprehensive assessment and developed criteria to define loans as nonperforming if they are an addendum issued in 2018 specified the time frame for lenders to set aside funds to cover nonperforming loans two to seven years depending on whether the loan was secured or not as of 2020 eurozone lenders still have approximately 1 trillion worth of nonperforming loans on their books 3the international monetary fund imf also sets out multiple criteria for nonperforming government loans 4the imf has defined nonperforming loans as those whose nonperforming loans may damage the credit rating of the borrower making it harder and more expensive to borrow money in the future nonperforming loan npl vs reperforming loan rpl nonperforming loans are those in default reperforming loans are those that were once nonperforming and are now performing again the reperforming loans were once delinquent for at least 90 days and are now performing again reperforming loans are often loans where the borrower has filed for bankruptcy and has continued to make payments as a result of the bankruptcy agreement such an agreement generally allows the borrower to become current on their debt via a loan modification program example of a nonperforming loan npl imagine a hypothetical borrower who cannot make loan payments due to job loss after 90 days without payment the bank or lender will consider the loan nonperforming the bank would shift the loan to their nonperforming list and continue seeking payment for the debt there are multiple avenues available to the creditor one of the most common ways to collect the debt is to send it to a collections agency which will be paid a percentage of any money they recover the lender can also sell the debt to a debt buyer at a fraction of the face value although the creditor will lose money this is often a better financial choice than trying to collect on a nonperforming loan borrowers with nonperforming loans may be able to negotiate with creditors to forgive part of their debt however this may damage their credit rating making it harder and more expensive to borrow in the future | |
what happens to nonperforming loans | nonperforming loans can be sold by banks to other banks or investors the loan may also become reperforming if the borrower starts making payments again in other cases the lender may repossess the borrower s collateral the satisfy the loan balance | |
what are the causes of nonperforming loans | nonperforming loans tend to occur during economic hardships when delinquencies are high they happen when the borrower fails to make a payment for a long period of time such as 90 to 180 days | |
why do banks sell nonperforming loans | banks may sell nonperforming loans to focus on the loans that bring in money each month selling the loans at a discount may be more profitable than trying to collect money from a delinquent borrower who buys nonperforming loans other banks or distressed debt investors may consider investing in nonperforming loans as well as real estate investors | |
how do you solve a nonperforming loan | solving a nonperforming loan involves getting back on track with payments this is may be done with a loan modification agreement through the lender the bottom linethe number of nonperforming loans tends to rise during economic uncertainty these loans are the ones where borrowers do not or cannot make payments the loan goes to npl status if no payment is received for a set period of time usually 90 or 180 days depending on the lender | |
what are nonrenewable resources | nonrenewable resources are natural substances that are not replenished with the speed at which it is consumed as such a nonrenewable resource is a finite resource examples of nonrenewable resources include fossil fuels oil natural gas and coal the opposite of a nonrenewable resource is a renewable resource one that is replenished naturally or can be sustained understanding nonrenewable resourcesnonrenewable resources come directly from the earth this can be directly from the ground or a mine the reserves of these substances took billions of years to form and it will take billions of years to replace the supplies used as such the supplies of nonrenewable resources are finite and cannot be replaced humans extract these resources in gas liquid or solid form and then convert them to suit their needs crude oil natural gas coal and uranium are nonrenewable resources these are all processed into products that can be used commercially for instance the fossil fuel industry extracts crude oil from the ground and converts it to gasoline fossil fuel liquids also are refined into petrochemical products that are used as ingredients in the manufacture of literally hundreds of products from plastics and polyurethane to solvents some types of groundwater are considered nonrenewable resources if the aquifer is unable to be replenished at the same rate at which it s drained most societies are heavily dependent on nonrenewable resources especially for energy it s estimated that about 80 of all of the world s energy is consumed using fossil fuels 1 not only does this put a huge strain on the available supply but it also has a major impact on the environment burning fossil fuels releases carbon dioxide which leads to climate change in economic terms nonrenewables are resources of financial or economic value that cannot be readily replaced at the speed with which they are being consumed nonrenewable resources vs renewable resourcesnonrenewable resources are contrasted with renewable ones the supplies of renewable resources are abundant and endless which makes them easy to find and easy to replace unlike nonrenewable ones renewable resources are generally sustainable while the former can be depleted the latter can t the sun wind and water are the most common examples of renewable resources others include lumber which can be replenished through planting the earth s heat geothermal and biomass the call to use renewable resources especially as energy sources is becoming more common that s because our dependence on and consumption of nonrenewable resources is causing a rapid decline in supplies and leading to climate change clean energy sources include solar energy and turbines that are powered by wind these easily replenish themselves and don t have a detrimental impact on the environment | |
what about metals and minerals that come from the earth such as gold silver and iron these may be nonrenewable or renewable resources depending on who you ask they can fall into the former category because they are extracted from the earth but some people consider them renewable and sustainable because they are abundant and can be used and recycled | fossil fuels and nonrenewable resourcesfossil fuels are all nonrenewable but not all nonrenewables are fossil fuels crude oil natural gas and coal are all considered fossil fuels but uranium is not rather it is a heavy metal that is extracted as a solid and then converted by nuclear power plants into a fuel source all of these nonrenewable resources have proved historically to be valuable energy sources that are inexpensive to extract storage conversion and shipping are easy and cheap fuels created from nonrenewable resources are still the primary source of all the power generated in the world due to their affordability and high energy content renewable growthfollowing the basic rule of supply and demand the cost to obtain nonrenewable resources will continue to rise as they become scarcer supply for many of these fuels is in danger of running out completely eventually their prices will hit a point that end users cannot afford forcing a move toward alternative energy sources concern over the impact of fossil fuel use on the environment and its contribution to climate change continues to grow the first international agreement on fighting climate change was the kyoto protocol adopted in 1997 2 in 2015 196 different parties adopted the paris agreement an international treaty on climate change by signing the parties agreed to take steps to reduce greenhouse gas emissions 3the alternatives to fossil fuels require ample lead time to be put into place that process has begun slowly wind power generated about 6 3 of american electrical power in 2017 and was the source of about 8 4 in 2020 45 in 2023 wind energy provided 10 of total electricity nationwide including more than 60 of the power in iowa and 40 in south dakota kansas and oklahoma 6advantages of investing in nonrenewable resourcesthere are a few specific unique benefits of investing in nonrenewable resources these benefits are not meant to be an exhaustive list but investing in nonrenewable resources may result in the limitations of investing in nonrenewable energythere are also some downsides to keep in mind when considering investing in nonrenewable energy examples of nonrenewable resource etfsthere are plenty of etfs that invest in nonrenewable resources in addition many etfs invest in companies associated with the extraction and deployment of those resources some examples of these etfs include | |
what defines a nonrenewable resource | nonrenewable resources are derived from the earth in a finite supply that can take billions of years to replenish historically many nonrenewables have been relatively cheap to extract but as their supply continues to diminish the cost of this extraction may rise in price leading customers to use alternative sources such as solar and wind energy | |
what are the different types of nonrenewable resources | among the most common examples of natural resources are crude oil coal uranium and mineral sources such as gold one subset of nonrenewable resources includes crude oil and natural gas both of these substances are made out of organic carbon material depending on the form it takes after heating and compressing over time another form of nonrenewables is minerals which include gold silver and iron unlike crude oil and natural gas these are quite difficult and expensive to extract meanwhile different types of groundwater are nonrenewables when they do not replenish at their draining speed | |
how do nonrenewables differ from renewable resources | since nonrenewables by definition will diminish in supply over time the law of supply and demand suggests that their price will continue to rise renewables by contrast have an infinite supply however at the same time the cost and time required to establish them will be lengthy more recently demand for renewables has grown in tandem with governmental incentives with many of their costs decreasing over time solar energy is one prime example of this trend | |
how do nonrenewable resources affect climate change | humans depend heavily on fossil fuels like crude oil natural gas and coal to supply energy burning these commodities release carbon dioxide into the atmosphere this is the primary greenhouse gas that contributes to climate change the more fossil fuels we burn the more gases build up this warms up the climate and causes shifts in the atmosphere in the water and on the land | |
what are some examples of renewable resources | renewable resources are those whose supplies are abundant and can be easily replenished unlike nonrenewable resources they are considered to be sustainable examples of renewable resources are the sun wind water heat from the earth and biomass the bottom linefossil fuels are normally the first thing most people think of when they hear the word nonrenewable resources collectively these are resources that come from the earth they are extracted and converted for human consumption usually as energy sources what sets them apart from renewable resources is that their supplies are finite and they aren t considered sustainable because of the damage they do to the environment | |
what is a nonresident alien | a nonresident alien is a noncitizen who has not passed the green card test or the substantial presence test according to the internal revenue service irs 1 nonresident aliens must pay taxes on income earned in the u s typical examples of nonresident aliens are teachers people seeking medical treatment and students 2understanding nonresident aliensonce a person has been inside the u s for a specific period they may qualify as a resident alien under the substantial presence test foreign nationals are classified as either resident or nonresident aliens to pass the substantial presence test an individual must stay in the u s for more than 31 days in any given current year they must also have resided in the u s for more than 183 days over a three year period which includes the current year 2 those not passing the test or not having or qualifying for a green card must file their taxes as nonresident aliens special considerationslike permanent citizens resident aliens pay taxes on all earned income however a nonresident alien is subject to taxation only under specific circumstances for a nonresident alien in the u s income is taxed based on whether or not it is effectively connected with a trade or business in the u s effectively connected income includes personal service income wages salaries commissions etc certain investment income and certain business income effectively connected income is taxed at the same rates that apply to u s citizens and u s residents income that is not effectively connected to trade or business in the u s is taxed at a flat 30 nonresident aliens may also enjoy other tax benefits such as international treaty exemptions 3nonresident alien income sources may be taxable should the source come from the u s for example rent payments on properties they own within the u s would be taxable as well as any royalties associated with the extraction of natural resources from the properties 4 nonresident aliens are required to submit tax filings regarding their u s income generating activities 5nonresident aliens must file form 1040nr or form 1040nr ez if they are filing with no dependents the deadline for filing form 1040nr or form 1040nr ez is april 15th if you were an employee and received wages subject to u s income tax withholding otherwise the due date is june 15th before leaving the u s a nonresident alien may need to file a form 1040 c this form confirms they have paid all tax obligations the nonresident alien must file this form to obtain a certificate of compliance known as the sailing or departure permit 6 the certificate of compliance asserts that the nonresident alien complies with applicable tax laws as of their date of departure however a form 1040 c does not remove the requirement to file an appropriate form 1040nr for annual tax filing purposes 5 | |
what is a nontariff barrier | a nontariff barrier is a way to restrict trade using trade barriers in a form other than a tariff nontariff barriers include quotas embargoes sanctions and levies some countries frequently use nontariff barriers to restrict the amount of trade they conduct with other countries as part of their political or economic strategies | |
how nontariff barriers work | countries commonly use nontariff barriers in international trade decisions about when to impose nontariff barriers are influenced by the political alliances of a country and the overall availability of goods and services any barrier to international trade including tariffs and nontariff barriers generally influences the global economy because it limits the functions of the free market the lost revenue that some companies may experience from these barriers can be considered an economic loss especially for proponents of laissez faire capitalism they believe that governments should abstain from interfering in the workings of the free market countries can use nontariff barriers in place of or in conjunction with conventional tariff barriers these are taxes that an exporting country pays to an importing country for goods or services tariffs are the most common type of trade barrier and they increase the cost of products and services in an importing country countries often pursue alternatives to standard tariffs because they release countries from paying added taxes on imported goods alternatives to standard tariffs can have a meaningful impact on the level of trade while creating a different monetary impact than standard tariffs types of nontariff barriersnontariff barriers exist in several forms countries may use licenses to limit imported goods to specific businesses a business is permitted to import goods that would otherwise be restricted for trade in the country when it s granted a trade license countries often issue quotas for importing and exporting both goods and services they agree on specified limits for products and services allowed for importation to a country there are no restrictions on importing these goods and services in most cases until a country reaches its quota which it can set for a specific time quotas are also often used in international trade licensing agreements embargoes are the result of a country or several countries officially banning the trade of specified goods and services with another governments may take this measure to support their specific political or economic goals countries impose sanctions on other countries to limit their trade activity sanctions can include increased administrative actions or additional customs and trade procedures that slow or limit a country s ability to trade exporting countries sometimes use voluntary export restraints to set limits on the number of goods and services they can export to specified countries these restraints are typically based on availability and political alliances nontariff barriers may encourage a local economy to self manufacture very similarly to a manufacturing country the target outcome is largely the same though the mechanism changes advantages and disadvantages of nontariff barriersthe primary advantage of nontariff barriers is the protection of domestic industries from foreign competition governments can shield their industries from low cost imports supporting local businesses and preserving jobs by imposing regulations and standards nontariff barriers related to product standards and regulations help ensure that imported goods meet specific quality and safety standards this can be advantageous for consumers by reducing the risk of substandard or unsafe products entering the market nontariff barriers are also implemented to safeguard national security interests these measures can include export controls on sensitive technologies or restrictions on imports of certain strategic goods to prevent them from falling into the wrong hands they re used to counteract the practice of dumping where foreign producers sell goods in a foreign market at prices below their cost of production to seize the competitive market one of the most significant disadvantages of nontariff barriers is their potential to distort international trade nontariff barriers can disrupt the natural flow of goods by creating obstacles to imports leading to trade imbalances inefficiencies and market distortions this is obviously intentional because nontariff barriers often limit the variety of goods available to consumers but it impacts consumers who then have fewer options they may be denied access to potentially superior or more affordable products compliance with nontariff barriers can be costly for both producers and consumers manufacturers may have to make adjustments to their production processes to meet specific standards importers can incur additional expenses related to documentation inspections and compliance checks nontariff barriers are often more complex than tariffs with sometimes uncertain implications nontariff barriers can discriminate against foreign goods in favor of domestic products in some cases this violates the principles of non discrimination and fair trade enshrined in international trade agreements overly restrictive nontariff barriers can also hinder economic growth by limiting access to global markets and stifling competition this can slow down innovation and productivity globally nontariff barriers can promote activities that don t promote the best resource allocation resources may be misallocated when nontariff barriers protect inefficient domestic industries capital and labor may be directed toward industries that might not be globally competitive without trade restrictions this puts an overall efficiency strain on the global economy may protect domestic industriesensures product quality and safetymay preserve national securitymay prevent product dumping from other countriesmay distort international trade leading to trade imbalancesmay restrict consumer choicesmay be more complex and difficult to understandmay not yield the most efficient economic policynontariff vs tariffboth tariffs and nontariff barriers are two distinct mechanisms that countries employ to regulate international trade tariffs are monetary barriers in the form of taxes imposed on imported or exported goods nontariff barriers encompass a diverse range of non monetary measures tariffs target specific products or industries but nontariff barriers can have a broader and often less transparent impact on trade tariffs are typically a subject of negotiation in trade deals and offer some flexibility in adjusting rates nontariff barriers can be more challenging to quantify and may require complex compliance measures making them a critical focus in international trade negotiations tariffs directly affect the prices of imported goods in many cases and they can be used strategically to influence trade volumes and generate revenue for governments nontariff barriers are often employed to achieve various policy objectives beyond revenue generation although they can indirectly impact prices nontariff barriers may be put in place to safeguard domestic industries or to ensure product quality and safety there can be incidental pricing impacts as part of this barrier trade agreements often involve negotiations regarding both tariffs and nontariff barriers as their distinct characteristics require nuanced approaches for trade facilitation in some contexts both are used in tandem as it may be easier to manipulate one i e tariffs based on agreed upon nontariff barriers example of nontariff barriersthe united nations adopted a round of nontariff barriers against north korea and the kim jong un regime in december 2017 the nontariff barriers included sanctions that cut exports of gasoline diesel and other refined oil products to the nation nontariff barriers can be significant roadblocks for businesses looking to expand their markets in international trade the united states is actively committed to addressing this issue on multiple fronts the u s is pushing for the reduction or elimination of nontariff barriers in various regional contexts including the asia pacific economic cooperation and for contributing to analysis at the organization for economic co operation and development the united nations has also prohibited the export of industrial equipment machinery transport vehicles and industrial metals to north korea the intention of these nontariff barriers was to put economic pressure on the nation to stop its nuclear arms and military exercises | |
are nontariff barriers legal in international trade | nontariff barriers in international trade can be both legal and illegal depending on their nature and how they re implemented many nontariff barriers are legitimate measures employed by governments to achieve specific policy objectives such as protecting public health ensuring product safety or preserving national security these nontariffs are typically considered legal when they conform to international trade rules and agreements such as those established by the world trade organization | |
how can companies overcome nontariff barriers | companies can employ several strategies to overcome nontariff barriers in international trade they can adapt their products and operations to meet the required standards and regulations collaboration with local partners or trade associations can provide valuable insights and support in navigating nontariff pay companies can also engage in dialogue with government authorities to advocate for trade facilitation measures and compliance support | |
how are nontariff barriers enforced | nontariff barriers are enforced through a combination of regulatory and administrative measures by the importing country s government authorities these enforcement processes typically involve rigorous documentation and customs procedures including inspections testing and compliance checks to ensure adherence to specific requirements licensing and permits may be required for certain goods and import quotas are monitored to ensure that limits are not exceeded the bottom linenontariff barriers are obstacles to international trade that don t involve traditional import tariffs they can take various forms including regulatory requirements technical standards licensing procedures and quotas not trading can make it difficult for businesses to access foreign markets hindering trade by imposing additional costs and administrative burdens | |
what is the nordic model | the nordic model is the combination of social welfare and economic systems adopted by nordic countries it combines features of capitalism such as a market economy and economic efficiency with social benefits such as state pensions and income distribution the nordic model also known as the scandinavian model is most commonly associated with the countries of scandinavia sweden norway finland denmark and iceland 1understanding the nordic modelthe nordic model embraces both the welfare state and globalization two approaches to government that can be seen at times as opposites the core aspects of the nordic model include the public provision of social services funded by taxes investment in education child care and other services associated with human capital and strong labor force protections through unions and the social safety net 2 there is no minimum wage because unions ensure that wages remain high the nordic model emphasizes society wide risk sharing and the use of a social safety net to help workers and families adapt to changes in the overall economy brought on by increased global competition for goods and services these scandinavian economies have benefited from cultural homogeneity political freedoms and low levels of corruption 3much of the model is based on how nordic cultures have developed over the centuries the citizens have a high degree of trust in their government and a history of working together to reach compromises and address societal challenges through democratic processes citizens believe that both public institutions and private companies have their best interests in mind through a general social contract with an emphasis on fairness maintaining economic growth while providing social welfare services requires nordic countries to emphasize workforce participation nordic governments have to create incentives for their citizens to continue to work despite having generous welfare benefits 4 the finances of nordic governments are generally considered strong with economic growth steady this was not always the case as several nordic countries struggled with low productivity and high unemployment during the 1990s the nordic model is paid for by some of the world s highest tax rates 5the nordic model vs the u s systemthe nordic model is paid for by some of the highest tax rates in the world in 2022 tax revenues as a percentage of gross domestic product gdp were approximately 44 3 in denmark 41 98 in norway and 41 32 in sweden according to the organisation for economic co operation and development oecd that compares to the 27 66 of gdp raised by the united states through taxation in 2022 6according to pwc in 2024 finland s top personal income tax rate was 55 denmark s was 52 07 and norway s was 47 4 5 tax rates in these countries are relatively high on nearly all income not just that of wealthy people by comparison the top tax bracket in the u s in 2024 was 37 and only levied on individuals who make 609 350 or more 731 200 for married couples filing jointly 7 a key theme under debate in the 2020 u s elections was whether or not the nordic model also known as democratic socialism could work here | |
what is a normal course issuer bid ncib | a normal course issuer bid is a canadian term for a public company s repurchase of its own stock in order to cancel it a company is allowed to repurchase between 5 and 10 of its shares depending on how the transaction is conducted the issuer repurchases the shares gradually over a period of time such as one year this repurchasing strategy allows the company to buy only when its stock is favorably priced understanding the ncibpublic companies operating in canada must file a notice of intention to make an ncib with the stock exchanges they are listed on and receive their approval before proceeding with a repurchase there are limits on the number of shares the company can repurchase in a single day in another type of approved issuer bid a company will repurchase a set number of shares from its shareholders at a predetermined date and price if a company repurchases all of its outstanding shares in this manner it is called a going private transaction once an ncib is approved the company can proceed with repurchases as it sees fit during the period that has been established the company might or might not repurchase the full number of shares it is permitted to buy an ncib is launched when a company s executives believe its stock is undervalued in the market as with any stock repurchase program a company undertakes an ncib because its executives believe that the company s publicly traded stock shares are undervalued by taking back shares they are reducing the numbers available on the market their own buying activity reduces supply and raises demand leading the price higher once the value of shares rises to the desired level the company might sell off part of its stake in order to raise cash increase liquidity and widen its base of investors through a normal course issuer bid a company can take advantage of what it sees as a discount on the stock s current price an ncib can also be a tactic designed to ward off a hostile takeover attempt in such cases the company is reducing the volume of its shares that are available on the market and regaining more control over its own stock if the repurchase is big enough it can change the concentration and makeup of stock ownership the company may end up with a controlling interest that cannot be challenged by a third party once this happens the company can maintain its control by simply releasing too few new shares to allow any single buyer to accumulate enough shares to affect shareholder votes or force its agenda on the company s board of directors | |
what is a normal distribution | normal distribution also known as the gaussian distribution is a probability distribution that is symmetric about the mean showing that data near the mean are more frequent in occurrence than data far from the mean the normal distribution appears as a bell curve when graphed investopedia lara antalproperties of normal distributionthe normal distribution is the most common type of distribution assumed in technical stock market analysis the standard normal distribution has two parameters the mean and the standard deviation in a normal distribution mean average median midpoint and mode most frequent observation are equal these values represent the peak or highest point the distribution then falls symmetrically around the mean the width of which is defined by the standard deviation the normal distribution model is key to the central limit theorem clt which states that averages calculated from independent identically distributed random variables have approximately normal distributions regardless of the type of distribution from which the variables are sampled 1the normal distribution is one type of symmetrical distribution symmetrical distributions occur when a dividing line produces two mirror images not all symmetrical distributions are normal since some data could appear as two humps or a series of hills in addition to the bell curve that indicates a normal distribution observationsfor all normal distributions 68 2 of the observations will appear within plus or minus one standard deviation of the mean 95 4 will fall within two standard deviations and 99 7 within three standard deviations this fact is sometimes called the empirical rule a heuristic that describes where most of the data in a normal distribution will appear data falling outside three standard deviations 3 sigma would signify rare occurrences investopedia sabrina jiangskewness measures the degree of symmetry of a distribution the normal distribution is symmetric and has a skewness of zero if the distribution of a data set instead has a skewness less than zero or negative skewness left skewness then the left tail of the distribution is longer than the right tail positive skewness right skewness implies that the right tail of the distribution is longer than the left kurtosis measures the thickness of the tail ends of a distribution to the tails of a distribution the normal distribution has a kurtosis equal to 3 0 distributions with larger kurtosis greater than 3 0 exhibit tail data exceeding the tails of the normal distribution e g five or more standard deviations from the mean this excess kurtosis is known in statistics as leptokurtic but is more colloquially known as fat tails the occurrence of fat tails in financial markets describes what is known as tail risk distributions with low kurtosis less than 3 0 platykurtic exhibit tails that are generally less extreme skinnier than the tails of the normal distribution formulathe normal distribution follows the following formula note that only the values of the mean and standard deviation are necessary | |
how normal distribution is used in finance | the assumption of a normal distribution is applied to asset prices and price action traders may plot price points to fit recent price action into a normal distribution the further price action moves from the mean in this case the greater the likelihood that an asset is being over or undervalued traders can use the standard deviations to suggest potential trades this type of trading is generally done on very short time frames as larger timescales make it much harder to pick entry and exit points similarly many statistical theories attempt to model asset prices and assume they follow a normal distribution in reality price distributions tend to have fat tails and therefore have kurtosis greater than three such assets have had price movements greater than three standard deviations beyond the mean more often than expected under the assumption of a normal distribution even if an asset has gone through a long period where it fits a normal distribution there is no guarantee that the past performance truly informs the future example of a normal distributionmany naturally occurring phenomena appear to be normally distributed for example the average height of a human is roughly 175 cm 5 9 counting both males and females as the chart below shows most people conform to that average taller and shorter people exist with decreasing frequency in the population according to the empirical rule 99 7 of all people will fall with three standard deviations of the mean or between 154 cm 5 0 and 196 cm 6 5 those taller and shorter than this would be rare just 0 15 of the population each | |
what is meant by the normal distribution | the normal distribution describes a symmetrical plot of data around its mean value where the width of the curve is defined by the standard deviation it is visually depicted as the bell curve | |
why is the normal distribution called normal | the normal distribution is technically known as the gaussian distribution however it took on the terminology normal following scientific publications in the 19th century showing that many natural phenomena appeared to deviate normally from the mean this idea of normal variability was made popular as the normal curve by the naturalist sir francis galton in his 1889 work natural inheritance 2 | |
what are the limitations of the normal distribution in finance | although normal distribution is a statistical concept its applications in finance can be limited because financial phenomena such as expected stock market returns do not fall neatly within a normal distribution prices tend to follow more of a log normal distribution right skewed and with fatter tails therefore relying too heavily on a bell curve when making predictions can lead to unreliable results although most analysts are well aware of this limitation it is relatively difficult to overcome this shortcoming because it is often unclear which statistical distribution to use as an alternative the bottom linenormal distribution also known as the gaussian distribution is a probability distribution that appears as a bell curve when graphed the normal distribution describes a symmetrical plot of data around its mean value where the width of the curve is defined by the standard deviation | |
what are normal goods | normal goods are consumer products such as food and clothing that exhibit a direct relationship between demand and income as a consumer s income rises the demand for normal goods also increases understanding normal goodsa normal good or necessary good doesn t refer to the quality of the good but rather the level of demand for the good and its relationship to the increases or decreases of a consumer s income level demand for normal goods is determined by patterns of consumer behavior and as income levels rise consumers can often afford goods that were not previously available to them examples of normal goods include income elasticity of demandnormal goods have a positive income elasticity of demand where a change in demand and a change in income move in the same direction income elasticity of demand measures the magnitude with which the quantity demanded changes in reaction to a change in income it is used to understand changes in consumption patterns that result from changes in purchasing power income elasticity change in quantity purchased change in income begin aligned text income elasticity frac text change in quantity purchased text change in income end aligned income elasticity change in income change in quantity purchased a normal good has an income elasticity of demand that is positive but less than one if the demand for blueberries increases by 11 percent when income increases by 33 percent then blueberries have an income elasticity of demand of 0 33 or 11 33 blueberries qualify as a normal good economists use the income elasticity of demand to determine whether a good is a necessity or a luxury item companies also analyze the income elasticity of demand for their products and services to help forecast sales in times of economic expansions resulting in rising incomes or during economic downturns and declining consumer incomes normal goods vs inferior goodsinferior goods are the opposite of normal goods inferior goods are goods whose demand drops as consumers incomes rise as an economy improves and wages rise consumers will prefer a more costly alternative to inferior goods the term inferior doesn t refer to the quality but affordability public transportation tends to have an income elasticity of demand coefficient that is less than zero meaning that its demand falls as income rises classifying public transport as an inferior good most people prefer to drive a car if given a choice and can afford it inferior goods include all of the goods and services that people purchase only because they cannot afford higher quality substitutes normal goods vs luxury goodsluxury goods commonly have an income elasticity of demand that is greater than one and include items like expensive cars vacations fine dining and gym memberships consumers tend to spend a greater proportion of their income on luxury goods as their income rises whereas people spend an equal or lesser proportion of their income on normal and inferior goods as their income increases example of a normal goodjack earns 3 000 per month and spends 40 of his income on food and clothing or 1 200 per month if his income rises to 3 500 per month for a 16 increase in income jack can afford more so he may increase his purchases or demand for food and clothing to 1 320 per month for a 10 increase or 1 320 1 200 1 200 x 100 food and clothing are considered normal goods for jack because he increased his purchases by 10 when he realized a 16 raise his income elasticity of demand is 625 or 10 16 since food and clothing have an income elasticity of demand of less than one jack s food and clothing are normal goods | |
how are normal goods affected during a recession | most products or normal goods will experience a decrease in demand during a recession since periods of economic contraction reduce consumer income and they buy fewer goods | |
what influences normal goods from inferior goods and luxury goods | goods may be classified as normal inferior or luxury depending on the region or country where the item is demanded or sold | |
what is the income effect | the income effect is the resulting change in demand for a good or service caused by an increase or decrease in a consumer s income or purchasing power as income rises the income effect assumes that people will begin to demand more goods such as normal goods the bottom linenormal goods are products such as food clothing and household appliances demand for normal goods increase as income rises the income elasticity of demand formula measures the change in demand to a change in income | |
what is normal profit | normal profit is a profit metric that takes into consideration both explicit and implicit costs it may be viewed in conjunction with economic profit normal profit occurs when the difference between a company s total revenue and combined explicit and implicit costs are equal to zero investopedia sydney burnsunderstanding normal profitnormal profit is often viewed in conjunction with economic profit normal profit and economic profit are economic considerations while accounting profit refers to the profit a company reports on its financial statements each period normal profit and economic profit can be metrics an entity may choose to consider when it faces substantial implicit costs economic and normal profiteconomic profit is the profit an entity achieves after accounting for both explicit and implicit costs economic profit revenues explicit costs implicit costsnormal profit occurs when economic profit is zero or alternatively when revenues equal explicit and implicit costs total revenue explicit cost implicit cost 0ortotal revenue explicit implicit costsimplicit costs also known as opportunity costs are costs that will influence economic and normal profit a business will be in a state of normal profit when its economic profit is equal to zero which is why normal profit is also called zero economic profit normal profit occurs at the point where all resources are being efficiently used and could not be put to better use elsewhere when substantial implicit costs are involved normal profit can be considered the minimum amount of earnings needed to justify an enterprise unlike accounting profit normal profit and economic profit take into consideration implicit or opportunity costs of a particular enterprise | |
when attempting to calculate economic and normal profit it is important to understand the two components of total cost explicit costs are easily quantifiable and generally involve a transaction that is tied to an expense examples of explicit costs include raw materials labor and wages rent and owner compensation implicit costs on the other hand are costs associated with not taking an action called the opportunity cost and are therefore much more difficult to quantify implicit costs come into consideration when an entity is foregoing other types of income and choosing to take a different path some examples of implicit costs may include rental income foregone for the sake of business property utilization base salary income foregone by an entrepreneur choosing to run a business rather than work in another job or the difference in projected gain from investing at one rate of return level vs another businesses may analyze economic and normal profit metrics when determining whether to remain in business or when considering new types of costs | example of normal profitto better understand normal profit suppose that suzie owns a bagel shop called suzie s bagels which generates an average of 150 000 revenue each year also suppose that suzie has two employees each of whom she pays 20 000 per year and suzie takes an annual salary of 40 000 suzie also pays 20 000 annually in rent and 30 000 annually for ingredients and other supplies after meeting with her financial advisor suzie learns that based on her business and her individual skills the estimated opportunity cost of operating suzie s bagels full time is 20 000 each year based on this information suzie calculates that her average annual explicit costs are 20 000 20 000 40 000 20 000 30 000 130 000 this results in an accounting profit before taxes of 20 000 because her average annual implicit costs are 20 000 her average annual total costs will be 130 000 20 000 150 000 she observes that her total costs are equal to her total revenues and determines that her bagel shop is in a state of normal profit normal profit in macroeconomicsthe term normal profit may also be used in macroeconomics to refer to economic areas broader than a single business in addition to a single business as in the example above normal profit may refer to an entire industry or market in macroeconomic theory normal profit should occur in conditions of perfect competition and economic equilibrium conceptually this is because competition eliminates economic profit moreover economic profit can serve as a key metric for understanding the state of profits comprehensively within an industry when a company or companies are achieving economic profit it may encourage other firms to enter the market because there is profit potential new entrants contribute more of the product to the market which lowers the market price of goods and has an equalizing effect on profits eventually the industry reaches a state of normal profit as prices stabilize and profits decline in the meantime firms managing for economic profit may take action to obtain a more prominent market position improve operational performance to lower direct costs or cut costs to decrease indirect costs collectively actions from all industry participants can contribute to the level of revenue and total costs required for the normal profit level a similar yet inverse case can be said to apply in cases of economic loss in theory conditions of economic loss within an industry will drive companies to begin leaving that industry eventually competition will be sufficiently reduced so as to allow the remaining companies within the industry to move toward and potentially achieve a normal profit economic profit is more likely to occur in the case of a monopoly as the company in question has the power to determine the pricing and quantity of goods sold such a state of affairs is largely dependent on the presence of significant barriers to entry which prevent other firms from easily entering the market and driving costs down thereby disrupting the prominent company s monopoly generally governments will often attempt to intervene in order to increase market competition in industries where monopolies occur often through antitrust laws or similar regulations such laws are meant to prevent large and well established companies from using their foothold in the market to reduce prices and drive out new competition applications of normal profitnormal profit allows business owners to compare the profitability of their work with that of other possible business ventures for example if suzie from suzie s bagels would like to expand her business to include sandwiches she could return to her financial advisor to obtain estimates on how her revenue and cost structure would change including any changes to her opportunity costs after assessing her projected accounting normal and economic profits she can make a more informed decision on whether to expand her business normal profit can be used in macroeconomics to help determine whether an industry or sector is improving or declining as discussed economists may choose to follow economic and normal profit projection balances of an industry when exploring macroeconomic metrics and antitrust issues normal profit metrics may also be used to determine whether a state of monopoly or oligopoly is occurring and appropriate steps for legislative actions in developing an industry toward more equalized competition examples of implicit costs used in normal profit calculations may include foregone rental income foregone salary income or foregone investment gains from investing at one projected rate of return vs another special considerationsas demonstrated with suzie s bagels normal profit does not indicate that a business is not earning money because normal profit includes opportunity costs it is theoretically possible for a business to be operating at zero economic profit and a normal profit with a substantial accounting profit it is also important to consider that implicit cost is an important element of normal profit calculations but is also one that is estimated and difficult to determine with accuracy as such when looking at business expansion prospects new opportunity costs have the potential to be unreliable or involve new risks previously unaccounted for which affects the reliability of a normal profit calculation comprehensively | |
what is full retirement age fra | the retirement age at which you can receive full retirement benefits from social security is called the full retirement age fra it s also known as normal retirement age fra varies depending on the year you were born fra is 66 years and two months for people born in 1955 and it gradually rises to 67 for those born in 1960 or later 1claiming benefits before you reach full retirement age decreases them permanently fra also applies to pension plans such as employer sponsored plans police officers military service members and other public servants typically receive full benefits after a certain number of service years rather than at a specific age understanding full retirement agethe official retirement age for full social security benefits in the u s is 67 for people born in 1960 or later it s 66 for those born from 1943 to 1954 and 66 and two four six eight or 10 months for people born from 1955 to 1959 the retirement age increases by two months per birth year 1you can elect to receive social security benefits starting at age 62 but claiming benefits at a younger age than your fra will reduce your financial benefit permanently for example your monthly benefit will be 70 of the benefit available at full retirement age if your fra is 67 and you begin claiming benefits at age 62 you d receive 86 7 of the full retirement benefit if you waited to start claiming benefits at age 65 2your benefit will increase by 8 for each year that you delay claiming it after your fra if you were born in 1943 or later waiting until you reach age 70 will yield the maximum benefit there s no reason to wait beyond age 70 because your benefits won t increase any further 3factors other than age such as how much you ve paid into the system over the years affect the size of your social security retirement benefits 4 you must calculate your social security breakeven age to figure out the optimal age to start claiming benefits and to ensure that you properly evaluate the trade offs between the benefits start date and amount history of full retirement agethe fra was 65 when social security began in 1935 legislation in 1983 increased the fra for people born in 1938 or later to a maximum of 67 to account for gains in life expectancy 5social security s trustees project growing deficits for the social security trust fund drawing down its reserves to cover benefit payments the combined reserves of social security s old age and survivors insurance oasi trust fund and the disability insurance di trust fund would be depleted by 2034 according to 2023 annual reports this is a year later than the oasi trust fund alone is expected to pay full benefits 6some lawmakers have cited concerns about the program s solvency in advocating a further increase in the fra social security s projected deficits could be addressed with benefit cuts payroll tax increases or a combination of those approaches they might also be financed with debt alongside other deficit spending 7use the online calculator offered by the social security administration ssa to figure out your full retirement age average retirement age in the u s the average retirement age for americans has increased according to the center for retirement research at boston college 8 even so americans on average are retiring before they reach full retirement age men retire at an average age of 64 6 years the average retirement age for women is 62 3 years the research from boston college shows that the increase in the average retirement age has been fueled in large part by the later retirements of college graduates men with college degrees retire three years later than men who are high school graduates 9one major reason why both men and women who are high school graduates tend to retire earlier is that their health and life expectancy hasn t improved as much as those of college graduates their jobs also tend to be more physically demanding they re not able to take as much time off as workers with college degrees 10full retirement age around the worldfra around the world can be as young as 56 but it typically ranges between 65 and 67 it can differ for men and women in some countries | |
what is my social security full retirement age | your full retirement age is 66 years and two months if you were born in 1955 it gradually increases to age 67 for those born in 1960 or later 1 | |
how much does early retirement affect social security benefits | you can take social security benefits as early as age 62 but doing so will permanently reduce your benefits to 70 of what you would have received at full retirement age 2can i work after full retirement age you can collect social security retirement benefits at full retirement age while continuing to work but your benefits will be temporarily reduced if you begin collecting social security before your full retirement age and you earn over 22 320 in 2024 there s no limit on how much you can earn while collecting full benefits beginning with the month and year in which you reach your fra but 1 will be deducted for every 3 you earn over 59 520 in 2024 up to the month before you reach fra these earnings thresholds are periodically adjusted to keep pace with inflation 25the bottom linefull or normal retirement age is the age at which you can begin to collect your full social security benefits the exact age depends on the year you were born it s 67 if you were born in 1960 or later you can collect social security benefits before you reach your full retirement age beginning at age 62 but doing so will permanently reduce your monthly benefit | |
what is the normal yield curve | the normal yield curve is a yield curve in which short term debt instruments have a lower yield than long term debt instruments of the same credit quality this gives the yield curve an upward slope this is the most often seen yield curve shape and it s sometimes referred to as the positive yield curve analysts look to the slope of the yield curve for clues about how future short term interest rates will trend when there is an upward sloping yield curve this typically indicates an expectation across financial markets of higher interest rates in the future a downward sloping yield curve predicts lower rates understanding normal yield curvethis yield curve is considered normal because the market usually expects more compensation for greater risk longer term bonds are exposed to more risk such as changes in interest rates and an increased exposure to potential defaults also investing money for a long period of time means an investor is unable to use the money in other ways so the investor is compensated for this through the time value of money component of the yield in a normal yield curve the slope will move upward to represent the higher yields often associated with longer term investments these higher yields are compensating for the increased risk normally involved in long term ventures and the lower risks associated with short term investments the shape of this curve is referred to as normal over the additionally applicable term of positive in that it represents the expected shift in yields as maturity dates extend out in time it is most commonly associated with positive economic growth the roll down return strategy used by bond traders utilizes the normal yield curve and the associated bond prices also known as riding the curve the stragety works in a stable rate environment as a bond moves towards maturity the yield will decline but the price will increase traders hope to capture the magic window of opportunity when they can sell their long term bond holdings and profit on the price increase from the reduced risk yield curves as an indicatorthe yield curve represents the changes in interest rates associated with a particular security based on the length of time until maturity unlike other metrics the yield curve is not produced by a single entity or government instead it is set by measuring the feel of the market at the time often referring to investor knowledge to help create the baseline the direction of the yield curve is considered a solid indicator regarding the current direction of an economy and can be easily charted other yield curvesyield curves can also remain flat or become inverted in the first instance the flat curve demonstrates the returns on shorter and longer term investments are essentially the same often this curve is seen as an economy approaches a recession because fearful investors will move their funds into lower risk options driving up the price and lowering the overall yield inverted yield curves present a point where short term rates are more favorable than long term rates its shape is inverted when compared to a normal yield curve representing significant changes in market and investor behaviors at this point a recession is generally seen as imminent if it is not already occurring | |
what are normalized earnings | normalized earnings are adjusted to remove the effects of seasonality revenue and expenses that are unusual or one time influences normalized earnings help business owners financial analysts and other stakeholders understand a company s true earnings from its normal operations an example of this normalization would be to remove a land sale from a retail firm s financial statements in which a large capital gain was realized as selling products not selling land is the company s real business understanding normalized earningsnormalized earnings represent a company s earnings that omit the effects of nonrecurring charges or gains to better present a company s core business the one off effects of these profits or losses are removed as they can muddy the picture additionally normalized earnings can be used to present a firm s earnings while taking into account seasonal or cyclical sales cycles in short normalized earnings are the most accurate assessment of a company s true financial health and performance many companies incur one off expenses such as large lawyer fees or earn one off gains such as the sale of old equipment in both of these cases even though the costs and revenues are realized and affect the company s short term cash flow they are not indications of the company s long term performance to analyze the firm properly these effects have to be removed examples of normalized earningsthe most common form of earnings normalization occurs when expenses or revenues must be removed or sales cycles must be smoothed when normalizing large one off costs or earnings there are two types of normalization adjustments if for example a company that owns a fleet of trucks decides to sell the depreciating assets and purchase new ones both the earnings and the expenses from the sale are removed to normalize its earnings an accountant or analyst would do this by looking at the company s income statement and removing the money generated from other comprehensive income it would then remove the operating expense or debt financing used to purchase the new trucks another scenario where expenses are removed to normalize a company s earnings is in the event of an acquisition or purchase when this occurs the salary wages and other expenses paid to owners and officers of the company are removed since they won t be part of the new organization the remaining scenario that commonly involves normalizing is dealing with the earnings for companies with sales cycles or seasonality with situations like this earnings are adjusted using a moving average over a number of periods the simplest form of this is an arithmetic average if for example a company earns 100 in january 150 in february and 200 in march and uses a two month moving average its normalized earnings would be 125 for february and 175 for march the advantage of normalized earningsfor investors the biggest advantage to normalized earnings is that it allows for a more accurate comparison between companies common metrics like earnings per share eps can be drastically affected by the period when they are calculated particularly if a significant cost or profit unrelated to the core business occurs in the period by using normalized earnings per share investors can better analyze and compare companies based on the health of their core operations rather than the temporary boost or hit of a one off event | |
what is normative economics | normative economics is a perspective on economics that reflects normative or ideologically prescriptive judgments toward economic development investment projects statements and scenarios unlike positive economics which relies on objective data analysis normative economics is concerned with value judgments and statements of what ought to be it expresses ideological judgments about what may result in economic activity if public policy changes are made normative economic statements can t be verified or tested investopedia yurle villegasunderstanding normative economicsnormative economics aims to determine people s desirability or the lack thereof to various economic programs situations and conditions by asking what should happen or what ought to be therefore normative statements typically present an opinion based analysis in terms of what is thought to be desirable for example stating that the government should strive for economic growth of x or inflation of y could be seen as normative behavioral economics has also been accused of being normative in the sense that cognitive psychology is used to steer nudge people to make desirable decisions by engineering their choice architecture as positive economics describe economic programs situations and conditions as they exist normative economics aims to prescribe solutions normative economic statements are used to determine and recommend ways to change economic policies or to influence economic decisions the difference between positive and normative economics is that positive economics is concerned with how an economy behaves while normative economics makes a value judgment on the desirability of certain outcomes normative economics vs positive economicsnormative economics may be useful in establishing and generating new ideas from different perspectives but it cannot be the only basis for making decisions on important economic issues as it does not take an objective angle that focuses on facts and causes and effects economic statements coming from the positive economics angle can be broken down into determinable and observable facts that can be examined and tested because of this characteristic economists and analysts often practice their professions under the positive economic angle positive economics being the measurable perspective helps policymakers and other government and business authorities decide on important matters that affect particular policies under the guidance of fact based findings however policymakers business owners and other organizational authorities also typically look at what is desirable and what is not for their respective constituents making normative economics an important part of the equation when deciding on important economic matters paired with positive economics normative economics can branch into many opinion based solutions that mirror how an individual or one whole community portrays particular economic projects these kinds of views are especially important for policymakers or national leaders normative economics is closely related to behavioral economics the branch of psychology that examines the decisions of human actors some of the insights of behavioral economics include subtle ways to nudge consumers towards a desirable behavior without compelling or forbidding any one choice 1examples of normative economicsan example of normative economics would be the statement we should cut taxes in half to increase disposable income levels by contrast a positive or objective economic observation would be based on past data big tax cuts would help many people but government budget constraints make that option unfeasible here are more examples of normative statements normative statements cannot be tested or proved and they typically contain keywords such as should and ought normative economics come into play whenever policymakers use economic incentives to affect human behavior a common example is sin taxes on alcohol and tobacco rather than prohibit these vices the government may simply impose a tax that discourages the undesirable behavior these taxes imply a value judgment on the social value of alcohol and tobacco consumption another interesting example includes the income gaps between men and women or between workers of different ethnicities although these wage gaps were once uncontroversial they are now recognized as a sign of the inherent unfairness of the prevailing economic system wage gaps can be a demonstration of both positive and normative economics for example a study on the wage differential between thousands of employees would be an example of positive economics if it does not attempt any policy prescriptions but a study that tests different policies to reduce the gap would be normative economics because it makes a clear value judgment against wage gaps | |
what is a normative statement in economics | in economics normative statements are those that state a value judgment or preference on one outcome over another statements on how to prevent certain tragedies raise wages or otherwise improve conditions are considered normative statements | |
what is a positive statement in economics | in economics a positive statement is one that attempts to assess an objective reality without making a value judgment for example a study on rental costs would be an example of positive economics a study that claims that the rent is too high is an example of normative economics | |
what is the difference between normative and behavioral economics | behavioral economics is a discipline that studies the psychological factors that influence the behavior of economic actors this is closely related to normative economics which often uses the tools of behavioral economics to change the way humans make decisions a simple example is a decision to place healthy fruit near the cash register of a high school cafeteria by placing the healthy option in a prominent location students are subtly encouraged to make the healthier decision the bottom linenormative economics aims to reach desirable outcomes unlike positive economics normative thinking is explicitly value driven and based on the ideology and preferences of each individual economist this type of economic thinking is often used by policymakers to influence the behavior of consumers and the public | |
what was the north american free trade agreement nafta | the north american free trade agreement nafta was implemented to promote trade between the u s canada and mexico the agreement which eliminated most tariffs on trade between the three countries went into effect on jan 1 1994 numerous tariffs particularly those related to agricultural products textiles and automobiles were gradually phased out through jan 1 2008 nafta was terminated and replaced by the united states mexico canada agreement usmca in 2020 investopedia sydney saporitounderstanding the north american free trade agreement nafta nafta was an agreement that created a free trade area between the three major countries in north america the united states canada and mexico the deal was signed by the three parties in 1992 and went into effect two years later 1it aimed to encourage economic activity among north america s three major economic powers its primary focus was to open up and expand trade in the agricultural automotive and textile industries some of its main goals included proponents of the agreement believed that it would benefit the three nations involved by promoting freer trade and lower tariffs among them some experts also suggested that aligning mexico with the more established economies of the u s and canada would help boost its economic growth 2history of the north american free trade agreement nafta legislation for nafta was developed during george h w bush s presidency as the first phase of his enterprise for the americas initiative the agreement was built on an existing agreement between the u s and canada the u s canada free trade agreement from 1989 the u s began trade talks with mexico three years later adding canada to the negotiations 3the clinton administration believed nafta would create 200 000 u s jobs within two years and a million within five years because exports played a major role in u s economic growth as of april 2024 about 29 of all u s imports originate from mexico and canada they are respectively the united states first and second largest suppliers of imported goods approximately 35 of u s exports are destined for canada and mexico as of april 2024 4under president clinton the white house anticipated a dramatic increase in u s imports from mexico as a result of the lower tariffs through nafta additions to naftanafta s provisions were supplemented by two other regulations the north american agreement on environmental cooperation and the north american agreement on labor cooperation intended to prevent businesses from relocating to other countries to exploit lower wages more lenient worker health and safety laws and looser environmental regulations nafta did not eliminate regulatory requirements on companies wishing to trade internationally such as rule of origin regulations and documentation requirements that determine whether certain goods can be traded under nafta the free trade agreement also contained administrative civil and criminal penalties for businesses that violate any of the three countries laws or customs procedures provisions of naftathe full text of the trade agreement consisted of 22 chapters divided into eight sections as well as additional annexes and appendices each section was broadly aimed at facilitating trade within the hemisphere and eliminating trade barriers the most important provisions are highlighted below one of the main goals of nafta was to eliminate most tariffs and other restrictions on trade between the three countries before the implementation of nafta high import tariffs discouraged cross border trade in some manufactured goods the agreement also sought to eliminate non tariff barriers to trade such as border processing and licensing requirements nafta also provided increased protections for intellectual property such as trade secrets and computer software these protections increased the incentives for cross border trade because they reduced the risk of losing business secrets to an international competitor in response to critics who argued that nafta would lead to a decline in environmental and labor standards the clinton administration negotiated several side agreements to ensure protections for the environment and labor rights the first of these the north american agreement on labor cooperation included provisions to prevent child labor and other abuses but stopped short of protecting the right to organize the second the north american agreement on environmental cooperation introduced a commission to assess the results of liberalization on environmental regulations in order to further facilitate cross border trade the agreement included a dispute resolution process for disagreements between investors businesses and state governments this process was heavily criticized in all three countries as it was seen as a way for multinational corporations to overrule local regulations 5north american industry classification systemthe three nafta signatory countries developed a new collaborative business classification system that facilitates the comparison of business activity statistics across north america the north american industry classification system naics organizes and separates industries according to their production processes the naics replaced the u s standard industrial classification sic system allowing businesses to be classified systematically in an ever changing economy the new system enables easier comparability between all countries in north america to ensure that the naics remains relevant the system is reviewed every five years the three parties responsible for the formation and continued maintenance of the naics are the the first version of the classification system was released in 1997 a revision in 2002 reflected the substantial changes occurring in the information sector the 2022 review made changes to the classification of industries by creating 111 new ones this was done by reclassifying combining or splitting 156 naics 2017 industries or their parts 6naics is reviewed every five years in years ending in 2 and 7 the next scheduled review is set for 2027 7this classification system allows for more flexibility than the sic s four digit structure by implementing a hierarchical six digit coding system and classifying all economic activity into 20 industry sectors five of these sectors are primarily those that produce goods and the remaining 15 sectors provide some type of service every company receives a primary naics code that indicates its main line of business a company receives its primary code based on the code definition that generates the largest portion of the company s revenue at a specified location in the past year the first two digits of a naics code indicate the company s economic sector the third digit designates the company s subsector the fourth digit indicates the company s industry group the fifth digit reflects the company s naics industry and the sixth designates the company s specific national industry advantages and disadvantages of naftanafta s immediate aim was to increase cross border commerce in north america and it did indeed spur trade and investment among its three member countries by limiting or eliminating tariffs it was especially advantageous to small or mid size businesses because it lowered costs and did away with the requirement that a company have a physical presence in a foreign country to do business there most of the increase came from trade between the u s and mexico or between the u s and canada though mexico canada trade grew as well the 1 trillion threshold in trilateral trade from 1993 was reached in 2011 real per capita gross domestic product gdp also grew slightly in all three countries primarily canada and the u s 89during the nafta years u s trade deficits importing more from a nation than you export did increase especially with mexico nafta protected non tangible assets like intellectual property established dispute resolution mechanisms and through the naaec and naalc implemented labor and environmental safeguards it increased u s competitiveness abroad and exported higher u s workplace safety and health standards to other nations critics of nafta were concerned that the agreement would result in the relocation of american jobs to mexico despite the supplementary naalc many companies moved their manufacturing operations to mexico and other countries with lower labor costs including automakers and those in the garment industry however nafta may not have been the reason for all those moves some critics also cite the rising wave of mexican immigrants to the u s as a result of nafta partly because the expected convergence of u s and mexican wages didn t happen thus making the u s more attractive to mexican workers 10surge in cross border trade and investmentincreased competitiveness of u s industryopportunities for small businesseshigher universal health safety and environmental standardsloss of manufacturing jobs especially in certain industriesincreased inflation in the u s increased u s trade deficitsincreased wage gap between u s and mexiconafta vs usmcaon aug 27 2018 president donald trump announced a new trade deal with mexico to replace nafta the u s mexico trade agreement as it was called would maintain duty free access for agricultural goods on both sides of the border and eliminate non tariff barriers while also encouraging more agricultural trade between mexico and the united states on sept 30 2018 the agreement was modified to include canada the usmca took effect on july 1 2020 completely replacing nafta if not renewed the usmca will expire in 16 years from its start date 11a september 2018 joint press release from the u s and canada trade offices stated during the 2016 presidential election donald trump campaigned on a promise to repeal nafta and other trade agreements he deemed unfair to the united states the usmca went into effect on july 1 2020 although it builds on and uses nafta as a basis there are some differences the usmca also revised and toughened labor laws relating to mexico establishing an independent investigatory panel that can investigate companies accused of violating workers rights and stop shipments from those found to violate labor laws it also compelled mexico to enact a wide array of labor reforms from improving working conditions to increasing wages 13the following table shows other distinctions between these agreements indicating qualifications for tariff free status and other rules | |
what was the main goal of nafta | nafta aimed to create a free trade zone between the u s canada and mexico its goal was to make doing business in mexico and canada less expensive for u s companies and vice versa and to reduce the red tape needed to import or export goods | |
how did nafta work | among its three member nations nafta eliminated tariffs and other trade barriers to agricultural and manufactured goods along with services it also removed investment restrictions and protected intellectual property rights side agreements addressed environmental and labor concerns attempting to establish a common high standard in each country | |
is nafta still in effect | no nafta was effectively replaced by the united states mexico canada agreement signed on nov 30 2018 usmca went into effect on july 1 2020 11did nafta help the u s economy whether nafta helped the u s economy is a matter of some debate trade between the united states and its north american neighbors more than tripled from roughly 290 billion in 1993 to more than 1 trillion in 2011 cross border investments also surged and u s gdp overall rose slightly 9but economists find it s been tough to target the deal s direct effects from other factors including rapid technological change and expanded trade with countries such as china meanwhile debate persists regarding nafta s effect on employment which was badly hit in certain industries and wages which largely remained stagnant 2 | |
how did canada benefit from nafta | after nafta went into full effect u s and mexican investments in canada tripled u s investment alone grew from 70 billion in 1993 to more than 368 billion in 2013 2the bottom linealthough there were significant gains and serious losses debate continues surrounding nafta s impact while the u s canada and mexico all experienced increased trade economic growth and higher wages since nafta s implementation experts disagree on how much the agreement contributed to if at all u s manufacturing jobs immigration and the price of consumer goods the actual impact of the agreement is hard to isolate especially from the lingering effects of the significant economic technological and industrial trends in the past quarter century including the great recession nafta did not affect all three of its member nations to the same degree or in the same ways | |
what is the north american industry classification system | the north american industry classification system naics is a business classification system developed through a partnership among the united states canada and mexico this classification system facilitates the comparison of statistics of all business activities across north america 1 companies are classified and separated into industries that are defined by the same or similar production processes this system should not be confused with the national association of insurance commissioners naic or the national association of investors corp naic understanding the north american industry classification system naics the naics was established to replace and modernize the u s standard industrial classification system the new system enables easier comparison of all countries in north america 1 to ensure the naics continues to be relevant there is a planned system review every five years 2the history of the naicsthe naics is a collaborative effort the three parties responsible for the formation and continued maintenance of the naics are the instituto nacional de estadistica y geografia in mexico statistics canada and the united states office of management and budget through its economic classification policy committee staffed by the bureau of economic analysis bureau of labor statistics and the census bureau 1the first version of the classification system was released in 1997 a revision in 2002 included substantial changes to the construction wholesale trade retail trade and information sectors 3 in 2012 there was a slight reduction in the number of industries in the system and modifications were made to some of the system s sector classifications 4 the latest revision which occurred in 2022 reduced the number of industries from 1 057 to 1 012 changes in size standards were also included in the revision with seven sectors of industries affected 5naics coding systemthe naics classification system allows for more flexibility than the four digit structure of the sic 6 it uses a hierarchical six digit coding system classifying all economic activity into 20 different industry sectors five of these sectors are primarily those that produce goods while the remaining 15 sectors provide some type of service every company receives a primary naics code indicating its main line of business this primary code is determined by the code definition that generates the largest revenue for a company at a specified location in the past year 5naics codes are narrowed from 20 sector codes into 96 three digit subsector codes further divided into 308 four digit industry codes subdivided into 689 five digit industry codes and ultimately broken down into 1 012 six digit naics codes 7reading a naics codethe first two digits of a naics code indicate the largest business sector in which a company operates the third digit designates the company s subsector and the fourth digit indicates the industry group to which the company belongs the fifth digit of the code reflects the company s particular industry of operation the sixth and final digit designates the company s specific national industry 8 soybean farming for example has the naics code 111110 which is broken down to sector 11 subsector 111 industry group 1111 industry 11111 naics code 111110 9 | |
what is the north american securities administrators association nasaa | the north american securities administrators association nasaa is an organization of securities regulators whose aim is to protect investors from fraud founded in 1919 in the u s state of kansas its membership of 67 securities administrators from across north america works to protect customers of investment advice or securities as part of a complementary regulatory system that works at the federal state provincial and industry levels understanding the north american securities administrators association nasaa nasaa seeks to help investors identify and avoid fraud by educating the public investigating violations of state and provincial law and filing enforcement actions its membership is made up of regulators that may be appointed hired for career focused positions or are under the jurisdiction of their states attorneys general these regulators are responsible for licensing securities firms and investment professionals such as broker dealers and investment advisers registering certain securities offerings reviewing financial offerings of small companies auditing branch office sales practices and record keeping promoting investor education and most importantly enforcing state securities laws 1 in addition to protecting investors some state regulators may help small businesses raise money and stay in compliance with securities laws some regulators may work in a department that also regulates insurance or banking 1 nasaa s membership is made up of securities regulators from all 50 u s states the district of columbia puerto rico the u s virgin islands canada and mexico 2 nasaa s website features a variety of investor and professional resources including a fraud center that lists top investor traps a fraud awareness quiz fraud red flags how to contact a local securities regulator and how to investigate a broker or investment adviser special considerationsnasaa members work within the government to protect investors and ensure the integrity of the securities industry in the following ways nasaa also administers the series 63 series 65 and series 66 regulatory examinations which licenses financial professionals to function as an agent in most states the series 63 is a requirement for all registered securities agents 3 | |
what is north sea brent crude | north sea brent crude is a blended light sweet crude oil recovered from the north sea in the early 1960s brent crude oil has relatively low sulfur content and a relatively high gravity on the american petroleum institute s standard scale pricing for north sea brent crude classified as a sweet light crude serves as the most widely used benchmark for other worldwide oil markets understanding the north sea brent crudenorth sea brent crude contains a blend of oils recovered from the oilfield systems in the north sea categorization of this crude is as a light sweet crude due to its low density and low sulfur content light sweet crude oils are simpler to process into products such as gasoline because they contain a higher proportion of hydrocarbon molecules than other oils therefore they tend to fetch higher prices on commodity markets sweet crude is a classification of petroleum that contains less than 0 42 percent sulfur sulfur is undesirable in crude oils because it lowers the yield of high value refined products including gasoline and plastics benchmark crude oil serves as an investment tool for the industry in setting a point to act as a standard of comparison when evaluating different varieties of crude oil another significant benchmark crude is west texas intermediate wti which is lighter and sweeter than north sea brent crude wti futures and options are the most actively traded energy products in the world investing in north sea brent crudesince the oil crisis of the late 1970s the vast majority of crude oil commodity sales have taken place on the futures market brent futures are available on the intercontinental exchange in europe as well as the new york mercantile exchange nymex options linked to the north sea brent crude benchmark are also widely available investors typically trade brent related commodity contracts either as a hedge or on a speculative basis those taking hedge positions include companies that produce and market crude oil as well as refineries or other entities that process the oil hedging strategies for firms in fuel dependent industries such as airlines may also take advantage of brent related contracts for example some hedging strategies involve trading on crack spreads related to brent in which traders take simultaneous long and short positions in brent crude and finished products that use brent crude as a raw material for these types of trades to pay off the price differential between the raw materials and the finished goods must widen over time this type of contract might appeal to an oil refinery seeking to protect its profit margin from price volatility in the crude oil market history of north sea area crude oilthis large north sea deposit is bounded by the united kingdom norway the netherlands germany france denmark and belgium active oil fields include the brent forties oseberg ekofisk and ninian systems oil was discovered in the area in 1859 but it was not until 1966 that commercial exploration of the fields was undertaken commercial exploration grew in the 1970s just before the organization of petroleum exporting countries opec oil crisis the first pipeline transportation shortly after 1975 the high quality of the oil coupled with regional stability of the north sea area and opec oil embargo fears made the cost of production of the north sea brent crude beneficial at the time of exploration shell uk exploration and production would name production oilfields after birds the north sea field derives its name from the brent goose a north american species | |
what is the norwegian krone nok | the norwegian krone nok is the official currency of norway 1 its regulation and circulation are controlled by the country s central bank the norges bank 2 the bank has issued its eighth series of banknotes including the latest in november 2019 which saw new 1000 krone bills the year before introduced the new 50 krone and 500 krone bills and 2017 brought the new 100 krone and 200 krone bills 34as of august 2022 1 usd is equal to roughly 9 77 nok 5 a single norwegian krone is worth 0 10 cents 6understanding the norwegian kronethe norwegian krone or kroner the plural term subdivides into 100 re the english translation for the word krone is the crown coins come in denominations of 1 5 10 and 20 krone and banknotes appear in denominations of 50 100 200 500 and 1 000 kroner the currency symbol is kr 1the new banknotes feature images of norwegian maritime history on the front while the back shows an abstract of sea and wind in the form of a cubic pattern 4 for example the 50 krone note has a green tint an image of the utv r lighthouse on the front and the back features an abstract rendition of the light signal from a lighthouse as well as a the constellation ursa major 7history of the kronethe first circulation of the krone came in 1875 when it became the replacement of the speciedaler at the time the conversion rate was four kroner for one speciedaler following the switch norway joined the scandinavian monetary union an alliance that existed until the outbreak of world war i during the existence of the union the norwegian krone on the gold standard until 1931 when it was pegged to the british pound 8in 1939 the country s currency was pegged to the u s dollar usd but during the german occupation of norway in the second world war it was pegged to the reichsmark at the war s end the currency was pegged to the british pound gbp shortly after the krone was pegged to the us dollar until 1971 when it free floats in the market for seven years until it is linked to a basket of currencies then in 1992 the central bank moved away from a fixed exchange rate allowing the currency to float based on the foreign currency exchange rate 8the 10 syrian pound so closely resembles the 20 norwegian kroner that it can fool many coin operated automated service machines in norway 9economic impact on the nok s valueas with all currencies economic trends trigger fluctuation in the value of the norwegian krone currency investors may seek out the nok when the euro s eur value is in doubt increased activity in trading the nok may increase the rate of exchange changes in the global price of crude oil also affect the nok s value as norway is western europe s leading oil exporter 10norway s shipping hydroelectric power fishing and manufacturing all contribute to the country s gross domestic product gdp however it is interesting to note that many industries are state owned 11 historically the krone is a prudent investment as norway stakes claim to one of europe s most stable economies norway is one of the wealthiest countries on the globe and enjoys one of the highest standards of living according to the latest world bank data norway has a high income economy with slow population growth at 0 5 annually gdp growth for 2021 came in at 3 9 while the inflation deflator was at 16 9 12 | |
don t confuse the norwegian krone with the similarly named danish krone dkk or swedish krona sek the norwegian krone is worth 9 more than the swedish krona 13 | example of the norwegian kroneto understand the value of the norwegian krone in norway it is helpful to examine the currency s buying power with respect to familiar consumer goods according to the economist s popular big mac index as of june 2022 the cost of a big mac in norway averaged out to 62 krone in 2022 a figure equal to about 5 15 u s dollars this is the second most expensive big mac in the world just behind switzerland 14the average monthly salary in norway was 50 800 nok according to statistics norway a figure that converts to 5 178 1516 much of that salary is subject to income taxes which are returned to the public in the form of health care and generous welfare programs 17 | |
is the u s dollar stronger than the norwegian krone | the u s dollar is stronger than the norwegian krone and has steadily strengthened against it since 2015 18 this is likely due to changes in the respective interest rates between the two countries fluctuations in the price of oil and the weakening of the eurozone economy | |
what is the norwegian krone to usd exchange rate | one u s dollar is equal to 9 77 norwegian krone nok as of august 23 2022 5 | |
is the norwegian krone a safe haven | the norwegian krone is generally considered a safe currency in that its value is not likely to be affected by failures in other markets although it is occasionally affected by domestic troubles the norwegian economy is relatively stable and the currency is unlikely to see any sharp changes in value 11 | |
is the norwegian krone a good investment | although the norwegian krone nok is generally considered a safe and reliable currency it falls to each individual investor to decide whether it is worth investing in | |
does norway use the euro | norway is not a member state of the european union and therefore is not eligible to use the euro however the norwegian economy is closely tied to the eurozone and the country is a member of the european economic area 11investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is a nostro account | a nostro account refers to a bank account held in a foreign country by a domestic bank denominated in the currency of the overseas country nostros a term derived from the latin word for ours are frequently used to facilitate foreign exchange and trade transactions the opposite term vostro accounts derived from the latin word for yours is how a bank refers to the accounts that overseas banks have on their books denominated in the holding bank s home currency investopedia laura porter | |
how a nostro account works | a nostro account and a vostro account actually refer to the same entity but from a different perspective for example bank x has an account with bank y in bank y s home currency to bank x that is a nostro meaning our account on your books while to bank y it is a vostro meaning your account on our books these accounts are used to facilitate international transactions and to settle transactions that hedge exchange rate risk prior to the advent of the euro as a currency for financial settlements on jan 1 1999 banks needed to hold nostro accounts in all the countries that now use the euro 1since that date one nostro account for the entire eurozone has been sufficient if a country were to leave the eurozone either voluntarily or involuntarily banks would need to re establish nostros in that country in its new currency to continue making payments most large commercial banks worldwide hold nostro accounts in every country with a convertible currency example of a payment using a nostro accountthe following example illustrates the process of making a payment using a nostro account bank a which is in the u s enters into a spot foreign exchange contract to buy british pounds from bank b which is in sweden on the settlement date bank b must deliver pounds from its nostro account in the u k to the nostro account of bank a also in the u k on the same day bank a must pay dollars in the u s to the nostro account of bank b limitations on nostro accountsthe central banks of many developing countries limit the buying and selling of their currencies usually to control imports and exports and to control the exchange rate banks generally don t hold nostro accounts in those countries as there is little or no foreign exchange business | |
are nostro accounts similar to traditional demand deposit accounts | nostro accounts differ from demand deposit accounts which are held in the currency of the bank where they are located nostro accounts hold their balances in a foreign currency that of the other country where the bank s nostro account is based | |
what does nostro stand for | nostro is a word derived from the latin term for ours these accounts are frequently used to facilitate foreign exchange and trade transactions in an efficient way | |
are there fees charged for nostro accounts | there are fees charged for nostro accounts because it is an additional feature banks with nostro facilities usually charge maintenance fees that may be expensive individuals don t have nostro accounts 3the bottom linenostro accounts simplify the process of exchanging and trading in foreign currencies because they ease transactions conducted in another currency while helping hedge exchange rate risk these accounts are most often held in the major convertible currencies u s or canadian dollars the british pound the euro or the japanese yen the opposite term vostro account is the way in which a bank refers to the accounts that foreign banks have on their books that are denominated in the holding bank s home currency the bank holding a nostro or vostro account may be called the facilitator bank nostro accounts differ from standard demand deposit accounts because they are denominated in foreign currencies also only businesses or governments have nostro or vostro accounts they aren t offered in the same way to individual account holders | |
what does not for profit mean | not for profit organizations do not earn profits for their owners all of the money earned by or donated to a not for profit organization is used in pursuing the organization s objectives and keeping it running income is not distributed to the group s members directors or officers typically organizations in the nonprofit sector are tax exempt charities or other types of public service organizations as such they are not required to pay most taxes some well known nonprofit organizations include the american red cross the united way and the salvation army there are also nonprofit corporations known as nonstock corporations which are usually formed for such purposes as clubs rescue squads and religious and charitable organizations charitable purposes of a not for profit organizationif someone sees a need in their community or elsewhere in the world they can research their idea and put together a business plan outlining the proposed nonprofit s objectives and how it plans to meet those goals almost anyone can start a not for profit group and apply for tax exempt status but many not for profit organizations won t qualify for 501 c 3 status as it is only for charitable organizations not for profit organizations can be social clubs that exist to serve their members social welfare organizations civic leagues labor organizations and business leagues these would be tax exempt but not 501 c 3 1most not for profit organizations fall into one the following categories activities of not for profit organizationsnot for profit organizations often classify their activities in one of the three ways fundraising program and administrative the fundraising activities of a not for profit may range from public major events to more private smaller fundraising opportunities not for profit organizations may also solicit direct donations sell products or rely on major gifts these funds are used to pay for the two remaining types of activities first most of the fundraised funds should go to the not for profit s program this is the mission it was created to serve and money is spent to help solve the problem that caused the nonprofit to be formed in the first place funds are also used to pay for administrative expenses for example some back office functions like a bookkeeper are not directly related to offering program services however a bookkeeper is an essential part in maintaining the reporting requirements necessary to remain a not for profit for this reason not for profits often must spend at least a small portion of donations on expenses not directly tied to their mission not for profit and taxesto achieve tax exempt status the organization needs to request 501 c 3 status from the internal revenue service irs 2 to qualify the organization s purpose must be one of the following charitable religious educational scientific literary testing for public safety fostering national or international amateur sports competition or preventing cruelty to children or animals 3if desired a not for profit organization can also opt to incorporate once registered and running it has to maintain compliance with the appropriate state agency regulating charitable organizations 4thanks to their tax exempt status not for profit organizations are not subject to most forms of taxation including sales tax and property taxes in most cases only donations made to nonprofit 501 c 3 organizations are tax deductible not for profit organizations can be social organizations sports clubs etc without a charitable purpose so even if they are tax exempt donations might not be tax deductible for donors for example if a church is established as a not for profit organization it does not pay property taxes on the house of worship that it owns similarly if a not for profit charity accepts clothing donations sells the clothing and uses the money for its charitable purposes it does not pay property tax on the building that it uses as its store however not for profit organizations must remit payroll taxes on behalf of their employees 5 similarly the employees and directors who receive income from a not for profit organization must report the income to the irs for profit vs not for profitaside from the distinguishing feature that a not for profit organization does not distribute profits to its owners many nonprofits have much in common with for profit organizations for example while some not for profit organizations use only volunteer labor many large or even medium sized ones are likely to require a staff of paid full time employees managers and directors indeed as not for profit enterprises wish to accomplish their objectives in the same way as for profit enterprises business tactics and management techniques honed in the for profit world often work well in not for profit organizations too finally while for profit businesses can engage in a huge range of activities not for profit businesses must operate exclusively as a charity or for scientific religious or public safety purposes 3 additionally not for profit organizations may exist to collect income to dispense to other qualifying charities 6even tax exempt not for profit organizations are required to remit payroll taxes on behalf of their employees who also must report income from nonprofits to the irs nonprofit vs not for profitboth nonprofits and not for profits exist to operate an entity that does not earn a profit for the owners of the entity both are often overseen by a board of directors and all money raised by the entity are spent either on supporting the entity s mission and programmatic goals or used to support the administrative costs of running the entity not for profit organizations vary from nonprofits in that they often may not offer a broad public benefit instead not for profit organizations may exist to serve the best interest for a select few consider the example of a private sports club this club s purpose is not to better the entire community but a select subset of community members this organization may still be formed in a way to capitalize on favorable irs legislation however they are not formed for the explicit benefit of the public good in addition nonprofits may have a different legal structure nonprofits can have a separate legal structure while not for profit organizations can not nonprofits often operate to maximize the net proceeds collected to then be spent on the mission while not for profit organizations may simply exist to provide a non financial benefit last not for profit organizations are often run by volunteers whereas non profits are more likely to have paid staff common problems that not for profits encounterin a survey of nonprofits in the united states and canada released by the nonprofit research collaborative in 2019 staffing was the biggest problem encountered by those surveyed 18 identified challenges managing transitions in staff and the staff being too small salaries of course are generally higher in the for profit world the next most common problem at 11 was with donors their cultivation acquisition and retention as well as communications with them tying for third place at 10 was the state of the economy and the concomitant national mood and the impact of tax laws 7organizational issues involving boards leadership fundraising and budgeting clocked in at 9 while local issues especially too many nonprofits competing for funds and problems with articulating a mission or purpose and creating programs to fulfill it tied at 8 other concerns included starting and ending campaigns changing demographics and government funding 7one problem not specifically mentioned in the survey it would fall under the rubric of organizational issues is what is termed founder s syndrome according to the maine association of nonprofits 8 this happens when the founder of a nonprofit organization resists changes necessary to keep the group alive and thriving the founder may have assembled a like minded board when starting the organization but as time passes and board members change different ideas about what the group should be doing and how to go about it may arise especially when external forces present new challenges if a founder is trying to preserve their original vision when the organization needs to grow and change founder s syndrome has set in as the board not the founder is responsible for running the show this can lead to the difficult step of replacing the founder when compromise proves impossible can a not for profit organization make money yes in the sense that it can seek donations to fund its operations and may end up with a surplus of money in its coffers at the end of the fiscal year however all of that money eventually must be used to fund the organization s operations it cannot be distributed to the organization s owners as profit | |
are all nonprofits 501 c 3 organizations | no the 501 c 3 designation made by the internal revenue service irs only goes to charitable organizations social groups and sports clubs are two examples of organizations that can be tax exempt but not have 501 c 3 status generally organizations existing for scientific religious or public safety purposes can be tax exempt but not have 501 c 3 status 9 | |
are donations to all not for profits tax deductible | no only donations made to organizations that have a charitable purpose are allowed as itemized tax deductions by the irs 10the bottom linenot for profit organizations exist to better the world as opposed to nonprofit organizations they may exist to better not the general public but only a subset of people not for profit organizations may still receive favorable tax treatment through the irs and compared to a business its main intention is to not necessarily to maximize its net income or net assets | |
what is a not held order | a not held order gives a broker the time and price discretion to seek the best price available the broker is not held responsible for any potential losses or missed opportunities that result from their best efforts a held order in contrast requires immediate execution the not held order is usually a market or limit order 1understanding the not held orderan investor placing a not held order is trusting that the broker can obtain a better market price than the investor can get by accessing the market directly the broker has price and time discretion but may not be held responsible for any losses due to a missed opportunity this order is also known as a discretionary or with discretion order the broker is not held liable for failing to execute a trade above or below an attached limit price for example a broker may have received a with discretion order to buy 1 000 shares of abc with an upper limit of 16 the broker might think the market is about to fall and will not buy the stock when it is trading below 16 instead the market rallies and the broker can t execute the order below 16 since it was a not held order the investor has no recourse or grounds to complain not held orders are most common when trading international equities the orders that most investors place most of the time are held orders that is they require immediate execution at the current market price | |
when to use not held orders | not held orders are not widely used in liquid markets since the volume of activity gives the investor ample opportunity to get in and out of a position with ease | |
when a market or security is illiquid or moves erratically a not held order may give the investor more peace of mind | types of not held ordersbenefits of not held ordersbrokers have the benefit of seeing order flows and trading patterns which often gives them an edge when determining the best price and time to execute a customer s order for example a broker may notice a recurring spike in volume on the buy side of the order book that suggests a stock s price is likely to continue rising this would result in the broker executing a client s not held order sooner rather than later limitations of not held ordersthe investor who gives a not held order to a broker is placing full confidence in that broker to execute the trade at the best possible price the investor cannot dispute the trade execution provided that the broker met all regulatory requirements for instance if an investor thinks the broker shouldn t have executed the not held order before an fomc interest rate announcement the investor cannot seek a rebooking | |
what is a notary | a notary is a publicly commissioned official who serves as an impartial witness to the signing of a legal document document signings where the services of a notary are generally necessary are real estate deeds affidavits wills trusts powers of attorney bills of sale or other official transactional documents the main reason a notary is used is to deter fraud understanding the role of a notarya notary also referred to as a notary public can be used to create trusted documentation or that a transaction occured and was officially recorded for a document to be notarized it must contain a stated commitment the document must also contain original signatures from the parties involved before signing a document notaries ask for photo identification from the participating parties a notary can refuse to authenticate a document if they are uncertain about the identity of the signing parties or if there is evidence of fraud the document then receives a notarial certificate and the seal of the notary who witnessed the signings notaries cannot refuse to witness a document based on race nationality religion or sex notary historyaccording to the national notary association nna notaries were used as far back as 2750 b c e in egypt and sumeria called scribes by the egyptians these writers and witnesses documented much of the history of the ancient world the roman empire used notarii and scribae to witness and document everything from speeches to weather and to create official documents the first recognized notary was tiro a roman servant who developed a shorthand for recording speeches 2the chinese also used scribes to document events teachings log resource and labor data and help the state function with detailed accounting 3notaries accompanied christopher columbus on his voyages to assure king ferdinand and queen isabella that all discoveries were valid 4writer mark twain was a notary while salvador dali leonardo da vinci and calvin coolidge the 30th president of the united states were the sons of notaries coolidge remains the only president sworn into office by a notary his father 4women were not allowed to be notaries until the 1900s but now outnumber male notaries according to the nna 4 | |
how to become a notary | the steps to becoming a notary vary from state to state broadly notaries must be at least 18 years old and reside in the state where they are licensed costs to become a notary include training supplies a bond and the oath of office notaries cannot give legal advice and can be fined for doing so they are also not to act in situations where they have a personal interest requirements vary but in general most states require you to additionally many states do not allow someone to become a notary if they have a prior felony or misdemeanor conviction 1 | |
where can i notarize a document | many notaries provide their services and create listings or web pages with contact information many packaging stores postal centers postal services and copy centers have notaries employed also some places you can get a document notarized are you can also look online for online notaries in your area some states began exploring electronic and remote notary options during the covid 19 pandemic many states have enacted legislation authorizing remote online notarization ron following the covid 19 outbreak and pandemic using ron you can access the services of a notary online from anywhere as long as your state s requirements are met most states place regulatory compliance on the office of the secretary of state you can check with your secretary of state to see if ron is available | |
what does a notary do | a notary is a public official trusted by a state government to witness signatures and verify that transactions occurred or that something documented actually happened | |
what does it take to become a notary | to become a notary you need to meet your state s requirements then go through a learning and application process you also may be required to take an exam once you pass you re sworn into office as a notary | |
how much does it cost to be a notary | the fees to be a notary vary by state in some states notaries are required to recertify adding to the costs they also must buy their seal the bottom linenotaries have served an essential function in government and society for thousands of years from documenting crop yields in the past to verifying documents and signatures over the internet notaries continue to ensure that information provided can be trusted all states and counties have notaries you can find a notary in many businesses you might even find one living next door if you live in a remote area or cannot otherwise find a notary many states have enacted legislation to make it easier to have your documents notarized through remote technologies | |
what is notching | notching is the practice by credit rating agencies to give different credit ratings to the particular obligations or debts of a single issuing entity or closely related entities rating distinctions among obligations are made based on differences in their security or priority of claim with varying degrees of losses in the event of default obligations are subject to being notched higher or lower thus while company a may have an overall credit rating of aa its rating on its junior debt may be a | |
how notching works | companies are given credit scores by specialist credit rating agencies which evaluate a firm s creditworthiness and its ability to meet its debt payments and other obligations however a company may also issue several types of debts e g secured vs unsecured or related types of obligations such as preferred shares or convertible bonds as a result the credit rating on those particular debts or obligations may differ somewhat from the issuing company s overall credit rating due to unique risks or restrictions on those obligations moody s investors service moody s and standard poor s financial services s p are two major credit rating agencies that notch up or notch down instruments within the same corporate family depending on placement in an obligor s capital structure and their level of collateral the base from which an instrument is notched in either direction is an obligor s senior unsecured debt base 0 or the corporate family rating cfr notching also applies to the structural subordination of debt issued by operating subsidiaries or holding companies according to s p as an example the debt of a holding company of an enterprise could be rated lower than the debt of the subsidiaries the entities that directly own the enterprise s assets and cash flows notching is not a precise science and credit rating agencies may use different approaches to determine the credit risk of bond and debt issuers as a result it is not uncommon for different credit rating agencies to assign different credit ratings to the same issuer moody s updated notching guidancein 2017 moody s published an update to its 2007 notching methodology this most recent guidance indicated as applicable in most cases was as follows 12in a small number of cases moody s will notch beyond the 2 to 2 range under one or more of the following circumstances notching is not just used to evaluate the credit risk of bond and debt issuers it is also used to evaluate the credit risk of other types of financial instruments such as structured finance products such as collateralized debt obligations cdos cdos are complex securities that are backed by a pool of assets such as mortgages or corporate bonds the credit risk of a cdo is determined by evaluating the credit risk of the assets that make up the pool this process is known as tranche notching and it involves assigning different credit ratings to different tranches or slices of the cdo based on the level of subordination of the tranches tranches that are more highly subordinated i e ranked lower in the repayment hierarchy are considered to be more risky and are assigned lower credit ratings tranches that are more senior i e ranked higher in the repayment hierarchy are considered to be less risky and are assigned higher credit ratings example of notchingimagine that abc company has issued two corporate bonds bond a and bond b bond a is a senior bond which means that it has a higher priority for repayment in the event of default compared to bond b bond b is a junior bond which means that it has a lower priority for repayment abc company s creditworthiness is evaluated by a credit rating agency which determines that the company has a strong financial profile and is likely to be able to make timely interest and principal payments on both bond a and bond b as a result the credit rating agency assigns abc company an a credit rating and assigns both bond a and bond b an a credit rating as well however over time abc company s financial performance begins to deteriorate it takes on more debt and its profits decline which raises concerns about its ability to meet its financial obligations as a result the credit rating agency conducts a review of abc company s creditworthiness and decides to downgrade the company s overall credit rating from a to bbb in this case the credit rating agency would use notching to express the difference in credit risk between bond a and bond b since bond a is a senior bond it is considered to be less risky than bond b and is assigned a bbb credit rating bond b on the other hand is considered to be more risky and is assigned a bbb credit rating the difference in credit risk between bond a and bond b is expressed as two notches with bond a having a higher credit rating and a lower notch than bond b image by sabrina jiang investopedia 2021 | |
what is a notch in bond rating | in bond trading a notch is a measure of the difference in credit risk between two bonds usually issued by the same issuer it is calculated by taking the difference in the credit ratings of the two bonds and expressing it in terms of notches for example if one bond has a credit rating of a and another bond has a credit rating of bbb the difference in credit risk between the two bonds would be expressed as one notch | |
why is notching important | notching is important because it helps investors to make informed decisions about the creditworthiness of the various bonds and debt instruments issued by the same issuers by using easy to understand ratings grades or scores by understanding the likelihood of default investors can determine the level of risk they are willing to take on when investing in a particular bond or debt issuer this is especially important for investors who are considering purchasing high yield bonds as these bonds are generally considered to be more risky than investment grade bonds notching can also be used by bond and debt issuers to determine their own creditworthiness as it can help them to identify any areas where they may need to improve their financial health in order to attract investors | |
what is a notch downgrade | a notch downgrade is a decrease in the credit rating of a particular bond from a debt issuer it is expressed in terms of notches with each notch representing a difference in credit risk for example if a bond issuer s credit rating is downgraded from a to bbb the downgrade would be expressed as one notch a notch downgrade can occur when the creditworthiness of the bond or debt issuer deteriorates this can be due to a variety of factors including declining financial performance increased debt levels or changes in market conditions that affect the issuer s ability to meet its financial obligations a notch downgrade can have significant implications for the issuer as it may make it more difficult for the issuer to access funding in the future and may also lead to an increase in the issuer s borrowing costs it can also have negative consequences for investors in the issuer s bonds as a downgrade may indicate an increased risk of default and may lead to a decrease in the value of the bonds | |
what is subordination based notching | subordination based notching is a method of rating the credit risk of bond or debt issuers based on the level of subordination of the issuer s debts subordination refers to the ranking of debts in terms of priority for repayment in the event that the issuer becomes bankrupt or is unable to meet its financial obligations debts that are ranked higher in the subordination hierarchy are considered to be more senior and are more likely to be repaid in the event of default subordination based notching is used to determine the credit rating of an issuer by taking into account the level of subordination of the issuer s debts for example an issuer with highly subordinated debts i e debts that are ranked lower in the subordination hierarchy may be assigned a lower credit rating than an issuer with more senior debts this is because the issuer with highly subordinated debts is considered to be at a higher risk of default as it is less likely to have the financial resources available to meet its obligations subordination based notching is often used in the evaluation of structured finance instruments such as collateralized debt obligations cdos the bottom linenotching is the process of rating the credit risk of the various bonds from the same debt issuer such as a company or a government using discrete rating levels or notches so if a company issues several bonds not every one may receive the same credit rating based on its relative riskiness terms features subordination and clauses it is used to determine the likelihood that the issuer will default on its debt obligations notching can be used to determine the credit rating of an issuer which is a measure of the issuer s ability to make timely interest and principal payments notching can also be used to determine the risk premium that investors should demand for taking on the risk of investing in the bond or debt issuer | |
what is a note | a note is a legal document that serves as an iou from a borrower to a creditor or an investor notes have similar features to bonds in which investors receive interest payments for holding the note and are repaid the original amount invested called the principal at a future date notes can obligate issuers to repay creditors the principal amount of a loan in addition to any interest payments at a predetermined date notes have various applications including informal loan agreements between family members safe haven investments and complicated debt instruments issued by corporations understanding notesa note is a debt security obligating repayment of a loan at a predetermined interest rate within a defined time frame notes are similar to bonds but typically have an earlier maturity date than other debt securities such as bonds for example a note might pay an interest rate of 2 per year and mature in one year or less a bond might offer a higher rate of interest and mature several years from now a debt security with a longer maturity date typically comes with a higher interest rate all else being equal since investors need to be compensated for tying up their money for a longer period however notes can have many other applications a note can refer to a loan arrangement such as a demand note which is a loan without a fixed repayment schedule payback of demand notes can be called in or demanded at any point by the borrower typically demand notes are reserved for informal lending between family and friends or relatively small amounts notes can be used as currency for example euro notes are the legal tender and paper banknotes used in the eurozone euro notes come in various denominations including five 10 20 50 and 100 euros notes as investment vehiclessome notes are used for investment purposes such as a mortgage backed note which is an asset backed security for example mortgage loans can be bundled into a fund and sold as an investment called a mortgage backed security investors are paid interest payments based on the rates on the loans notes used as investments can have add on features that enhance the return of a typical bond structured notes are essentially a bond but with an added derivative component which is a financial contract that derives its value from an underlying asset such as an equity index by combining the equity index element to the bond investors can get their fixed interest payments from the bond and a possible enhanced return if the equity portion on the security performs well companies can issue both secured and unsecured debt securities that carry varied maturity dates a capital note is an example of an unsecured and short term debt it s important to remember that with any note or bond issued by a corporation the principal amount invested may or may not be guaranteed however any guarantee is only as good as the financial viability of the corporation issuing the note notes with tax benefitssome notes are purchased by investors for their income and tax benefits municipal notes for example are issued by state and local governments and can be purchased by investors who want a fixed interest rate municipal notes are a way for governments to raise money to pay for infrastructure and construction projects typically municipal notes mature in one year or less and can be exempt from taxes at the state and or federal levels notes as safe havenstreasury notes commonly referred to as t notes are financial securities issued by the u s government treasury notes are popular investments for their fixed income but are also viewed as safe haven investments in times of economic and financial difficulties t notes are guaranteed and backed by the u s treasury meaning investors are guaranteed their principal investment t notes can be used to generate funds to pay down debts undertake new projects improve infrastructure and benefit the overall economy the notes which are sold in 100 increments pay interest in six month intervals and pay investors the note s full face value upon maturity treasury notes are offered with maturity dates of two three five seven and 10 years as a result t notes generally have longer terms than treasury bills but shorter terms than treasury bonds issuers of unsecured notes are not subject to stock market requirements that force them to publicly avail information affecting the price or value of the investment other types of notesthere are many types of notes that are issued by governments and companies many of which have their own characteristics risks and features an unsecured note is a corporate debt instrument without any attached collateral typically lasting three to 10 years the interest rate face value maturity and other terms vary from one unsecured note to another for example let s say company a plans to buy company b for a 20 million price tag let s further assume that company a already has 2 million in cash therefore it issues the 18 million balance in unsecured notes to bond investors however since there is no collateral attached to the notes if the acquisition fails to work out as planned company a may default on its payments as a result investors may receive little or no compensation if company a is ultimately liquidated meaning its assets are sold for cash to pay back investors an unsecured note is merely backed by a promise to pay making it more speculative and riskier than other types of bond investments consequently unsecured notes offer higher interest rates than secured notes or debentures which are backed by insurance policies in case the borrower defaults on the loan a promissory note is written documentation of money loaned or owed from one party to another the loan s terms repayment schedule interest rate and payment information are included in the note the borrower or issuer signs the note and gives it to the lender or payee as proof of the repayment agreement the term pay to the order of is often used in promissory notes designating the party to whom the loan shall be repaid the lender may choose to have the payments go to them or to a third party to whom money is owed for example let s say sarah borrows money from paul in june then lends money to scott in july along with a promissory note sarah designates that scott s payments go to paul until sarah s loan from paul is paid in full a convertible note is typically used by angel investors funding a business that does not have a clear company valuation an early stage investor may choose to avoid placing a value on the company in order to affect the terms under which later investors buy into the business under the termed conditions of a convertible note which is structured as a loan the balance automatically converts to equity when an investor later buys shares in the company for example an angel investor may invest 100 000 in a company using a convertible note and an equity investor may invest 1 million for 10 of the company s shares the angel investor s note converts to one tenth of the equity investor s claim the angel investor may receive additional shares to compensate for the added risk of being an earlier investor | |
what is a notice of assessment | a notice of assessment noa is an annual statement sent by the canada revenue agency cra to taxpayers detailing the amount of income tax they owe it includes details such as the amount of their tax refund tax credit and income tax already paid it also lists deductions from total income total nonrefundable federal tax credits total british columbia nonrefundable federal tax credits and other figures understanding notices of assessmentthe figures in an noa are calculated based on the information taxpayers submit on their tax returns it lists any changes to them including corrections made to the information they submitted an noa also indicates whether an individual or business is subject to an audit tax filers have within 90 days of the date noted on the noa to make formal objections online or by mail they would have to provide supporting documentation but they won t owe any disputed tax payments until the cra completes its investigation a notice of assessment is an annual statement sent by the canada revenue agency to taxpayers detailing the amount of income tax they owe as well as the amounts of their tax refund tax credit income tax already paid and more registered retirement savings plan rrsp the noa provides important information about a tax filer s registered retirement savings plan rrsp it lists the maximum contributions an individual can make toward their rrsp for the following year this amount is equal to 18 of the previous year s earned income or the maximum amount for the current tax year whichever is less a tax filer can claim contributions to an rrsp as a deduction from overall taxable income taxpayers are not required to take contributions as deductions in the tax year they make them they can postpone rrsp deductions until the following year if they expect to have a significant increase in income that will push them to a higher tax bracket these are known as unused contributions the move would allow them to claim a larger reduction on a bigger tax bill however individuals would owe a tax if unused rrsp contributions from prior years and current contributions exceed the rrsp deduction limit shown on their latest noa by more than 2 000 the tax is 1 per month on the excess amount taxpayers can also make deductions from certain transfers they make into their rrsps without affecting their deduction limits the cra lists these as certain lump sum amounts from a non registered pension plan relating to services rendered during a time when a tax filer was a nonresident of canada eligible pension income from an estate or a testamentary trust and amounts received from foreign retirement arrangements including united states individual retirement accounts examples of rrsp contributionsif someone who earned 50 000 in income made contributions of 1 000 to their rrsp for a given year that person would be taxed on 49 000 of income if a person doesn t meet their maximum contribution limit for a given tax year that individual can roll over the amount left over into the following year say a person s contribution limit for a given tax year was 15 000 but they had made no contributions toward an rrsp that year the following year s limit would be that person s maximum contribution limit for the year plus 15 000 | |
what is a notice of default | the term notice of default refers to a public notice filed with a court that states that the borrower of a mortgage is in default on a loan the lender may file a notice of default when a mortgagor falls behind on their mortgage payments information on notices of default normally includes the borrower and lender s name and address the legal address of the property the nature of the default as well as other pertinent details a notice of default is often considered the first step toward foreclosure 1 | |
how notices of default work | a notice of default is a serious action taken by a lender it notifies a borrower that their delinquent mortgage payments have breached the limit as outlined in their mortgage loan contract lenders outline the number of delinquent payments allowed in a mortgage contract before default action is taken most contracts generally allow up to 180 days of missed payments and delinquencies before any action is taken to file a notice of default 3a notice of default is typically the final action lenders take before activating the lien and seizing the collateral for foreclosure a notice of default is usually filed with the state court in which the lien is recorded followed by a hearing to activate the perfected lien recorded with the mortgage closing some cases may allow time for the borrower to negotiate by potentially paying delinquent debt or suggesting a settlement 2if the case proceeds to the approval of the perfected property lien the lender then notifies the borrower that the lien is activated with an activated lien and a court order for property seizure the lender can take legal action asking the borrower to vacate the property 2all notices of default contain relevant information pertaining to the borrower lender and the property these details include but aren t limited to 13special considerationsif a borrower has several delinquent payments they are at risk of default on a mortgage loan this also poses the risk of lost collateral when this happens the lender may file a notice of default while this notice may lead to foreclosure that isn t always the case the lender may simply be taking this step as protocol and be willing to work with the borrower to bring the account up to date filing the notice may also include a negotiation grace period before further action is taken while some lenders use notices of default as the final step before foreclosure others use it as a way to work with borrowers to bring the mortgage up to date a notice of default and subsequent foreclosure actions are documented and reported to credit bureaus thus all foreclosure proceedings and actions can have serious repercussions on a borrower s credit score this will also reduce the borrower s ability to obtain a mortgage or any type of debt in the future 4some lenders may choose to serve the delinquent borrower with a notice of intention rather than a notice of default levy or they may provide warnings to the borrower which gives them time to negotiate | |
what is a notice of deficiency | a notice of deficiency is a legal determination by the irs of a taxpayer s tax deficiency it is an official written claim that a taxpayer owes additional income tax and often interest on that amount plus additional penalties it is issued when the irs proposes a change to a tax return because they found that the information reported on a return does not match their records a notice of deficiency is also sometimes referred to as a statutory notice a statutory notice of deficiency or an irs 90 day letter the official name for a notice of deficiency is irs notice cp2319a notice of deficiency and increase in tax tax laws require that the internal revenue service irs issues a notice of deficiency before assessing additional income tax estate tax gift tax and certain excise taxes unless the taxpayer agrees to the additional assessment although the language in the notice of deficiency says that the irs is proposing a change the notice of deficiency is a legal determination of tax deficiency that is presumptively correct 1 | |
how a notice of deficiency works | a notice of deficiency is usually triggered by tax information received from a third party filer such as an employer or a financial institution that does not match the information reported by the taxpayer 2 a notice of deficiency is triggered by a taxpayer s failure to timely respond to or to successfully appeal a pre assessment letter known as a 30 day letter 1 |
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