In finance, a bond is an instrument of indebtedness of the bond issuer to the holders. The most common types of bonds include corporate bonds; the bond is a debt security, under which the issuer owes the holders a debt and is obliged to pay them interest or to repay the principal at a date, termed the maturity date. Interest is payable at fixed intervals; the bond is negotiable, that is, the ownership of the instrument can be transferred in the secondary market. This means that once the transfer agents at the bank medallion stamp the bond, it is liquid on the secondary market, thus a bond is a form of loan or IOU: the holder of the bond is the lender, the issuer of the bond is the borrower, the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Certificates of deposit or short-term commercial paper are considered to be money market instruments and not bonds: the main difference is the length of the term of the instrument.
Bonds and stocks are both securities, but the major difference between the two is that stockholders have an equity stake in a company, whereas bondholders have a creditor stake in the company. Being a creditor, bondholders have priority over stockholders; this means they will be repaid in advance of stockholders, but will rank behind secured creditors, in the event of bankruptcy. Another difference is that bonds have a defined term, or maturity, after which the bond is redeemed, whereas stocks remain outstanding indefinitely. An exception is an irredeemable bond, such as a consol, a perpetuity, that is, a bond with no maturity. In English, the word "bond" relates to the etymology of "bind". In the sense "instrument binding one to pay a sum to another", use of the word "bond" dates from at least the 1590s. Bonds are issued by public authorities, credit institutions and supranational institutions in the primary markets; the most common process for issuing bonds is through underwriting. When a bond issue is underwritten, one or more securities firms or banks, forming a syndicate, buy the entire issue of bonds from the issuer and re-sell them to investors.
The security firm takes the risk of being unable to sell on the issue to end investors. Primary issuance is arranged by bookrunners who arrange the bond issue, have direct contact with investors and act as advisers to the bond issuer in terms of timing and price of the bond issue; the bookrunner is listed first among all underwriters participating in the issuance in the tombstone ads used to announce bonds to the public. The bookrunners' willingness to underwrite must be discussed prior to any decision on the terms of the bond issue as there may be limited demand for the bonds. In contrast, government bonds are issued in an auction. In some cases, both members of the public and banks may bid for bonds. In other cases, only market makers may bid for bonds; the overall rate of return on the bond depends on the price paid. The terms of the bond, such as the coupon, are fixed in advance and the price is determined by the market. In the case of an underwritten bond, the underwriters will charge a fee for underwriting.
An alternative process for bond issuance, used for smaller issues and avoids this cost, is the private placement bond. Bonds sold directly to buyers may not be tradeable in the bond market. An alternative practice of issuance was for the borrowing government authority to issue bonds over a period of time at a fixed price, with volumes sold on a particular day dependent on market conditions; this was called a tap bond tap. Nominal, par, or face amount is the amount on which the issuer pays interest, which, most has to be repaid at the end of the term; some structured bonds can have a redemption amount, different from the face amount and can be linked to the performance of particular assets. The issuer has to repay the nominal amount on the maturity date; as long as all due payments have been made, the issuer has no further obligations to the bond holders after the maturity date. The length of time until the maturity date is referred to as the term or tenor or maturity of a bond; the maturity can be any length of time, although debt securities with a term of less than one year are designated money market instruments rather than bonds.
Most bonds have a term of up to 30 years. Some bonds have been issued with terms of 50 years or more, there have been some issues with no maturity date. In the market for United States Treasury securities, there are three categories of bond maturities: short term: maturities between one and five years; the coupon is the interest rate. This rate is fixed throughout the life of the bond, it can vary with a money market index, such as LIBOR, or it can be more exotic. The name "coupon" arose because in the past, paper bond certificates were issued which had coupons attached to them, one for each interest payment. On the due dates the bondholder would hand in the coupon to a bank in exchange for the interest payment. Interest can be paid at different frequencies: semi-annual, i.e. every 6 months, or annual. The yield is the rate of return received from investing in the bond, it refers either to The current yield, or running yield
A municipal bond known as a Muni Bond, is a bond issued by a local government or territory, or one of their agencies. It is used to finance public projects such as roads, schools and seaports, infrastructure-related repairs; the term municipal bond is used in the United States, which has the largest market of such trade-able securities in the world. As of 2011, the municipal bond market was valued at $3.7 trillion. Potential issuers of municipal bonds include states, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, other governmental entities at or below the state level having more than a de minimis amount of one of the three sovereign powers: the power of taxation, the power of eminent domain or the police power. Municipal bonds secured by specified revenues. In the United States, interest income received by holders of municipal bonds is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code, may be exempt from state income tax as well, depending on the applicable state income tax laws.
The state and local exemption was the subject of recent litigation in Department of Revenue of Kentucky v. Davis, 553 U. S. 328. Unlike new issue stocks that are brought to market with price restrictions until the deal is sold, most municipal bonds are free to trade at any time once they are purchased by the investor. Professional traders trade and re-trade the same bonds several times a week. A feature of this market is a larger proportion of smaller retail investors compared to other sectors of the U. S. securities markets. Some municipal bonds with higher risk credits, are issued subject to transfer restrictions. Outside the United States, many other countries in the world issue similar bonds, sometimes called local authority bonds or other names; the key defining feature of such bonds is that they are issued by a public-use entity at a lower level of government than the sovereign. Such bonds follow similar market patterns as U. S. bonds. That said, the U. S. municipal bond market is unique for its size, liquidity and tax structure and bankruptcy protection afforded by the U.
S. Constitution. Municipal debt predates corporate debt by several centuries—the early Renaissance Italian city-states borrowed money from major banking families. Borrowing by American cities dates to the nineteenth century, records of U. S. municipal bonds indicate use around the early 1800s. The first recorded municipal bond was a general obligation bond issued by the City of New York for a canal in 1812. During the 1840s, many U. S. cities were in debt, by 1843 cities had $25 million in outstanding debt. In the ensuing decades, rapid urban development demonstrated a correspondingly explosive growth in municipal debt; the debt was used to finance a growing system of free public education. Years after the Civil War, significant local debt was issued to build railroads. Railroads were private corporations and these bonds were similar to today's industrial revenue bonds. Construction costs in 1873 for one of the largest transcontinental railroads, the Northern Pacific, closed down access to new capital.
Around the same time, the largest bank of the country of the time, owned by the same investor as that of Northern Pacific, collapsed. Smaller firms followed suit as well as the stock market; the 1873 panic and years of depression that followed put an abrupt but temporary halt to the rapid growth of municipal debt. Responding to widespread defaults that jolted the municipal bond market of the day, new state statutes were passed that restricted the issuance of local debt. Several states wrote these restrictions into their constitutions. Railroad bonds and their legality were challenged, this gave rise to the market-wide demand that an opinion of qualified bond counsel accompany each new issue; when the U. S. economy began to move forward once again, municipal debt continued its momentum, maintained well into the early part of the twentieth century. The Great Depression of the 1930s halted growth, although defaults were not as severe as in the 1870s. Leading up to World War II, many American resources were devoted to the military, prewar municipal debt burst into a new period of rapid growth for an ever-increasing variety of uses.
Today, in addition to the 50 states and their local governments, the District of Columbia and U. S. territories and possessions do issue municipal bonds. Another important category of municipal bond issuers which includes authorities and special districts has grown in number and variety in recent years; the two most prominent early authorities were the Port of New York Authority, formed in 1921 and renamed Port Authority of New York and New Jersey in 1972, the Triborough Bridge Authority, formed in 1933. The debt issues of these two authorities are exempt from federal and local governments taxes. Municipal bonds provide tax exemption from federal taxes and many state and local taxes, depending on the laws of each state. Municipal securities consist of long-term issues. Short-term notes are used by an issuer to raise money for a variety of reasons: in anticipation of future revenues such as tax
A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either indirectly through capital markets. Due to their importance in the financial stability of a country, banks are regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords. Banking in its modern sense evolved in the 14th century in the prosperous cities of Renaissance Italy but in many ways was a continuation of ideas and concepts of credit and lending that had their roots in the ancient world. In the history of banking, a number of banking dynasties – notably, the Medicis, the Fuggers, the Welsers, the Berenbergs, the Rothschilds – have played a central role over many centuries.
The oldest existing retail bank is Banca Monte dei Paschi di Siena, while the oldest existing merchant bank is Berenberg Bank. The concept of banking may have begun in ancient Assyria and Babylonia, with merchants offering loans of grain as collateral within a barter system. Lenders in ancient Greece and during the Roman Empire added two important innovations: they accepted deposits and changed money. Archaeology from this period in ancient China and India shows evidence of money lending. More modern banking can be traced to medieval and early Renaissance Italy, to the rich cities in the centre and north like Florence, Siena and Genoa; the Bardi and Peruzzi families dominated banking in 14th-century Florence, establishing branches in many other parts of Europe. One of the most famous Italian banks was the Medici Bank, set up by Giovanni di Bicci de' Medici in 1397; the earliest known state deposit bank, Banco di San Giorgio, was founded in 1407 at Italy. Modern banking practices, including fractional reserve banking and the issue of banknotes, emerged in the 17th and 18th centuries.
Merchants started to store their gold with the goldsmiths of London, who possessed private vaults, charged a fee for that service. In exchange for each deposit of precious metal, the goldsmiths issued receipts certifying the quantity and purity of the metal they held as a bailee; the goldsmiths began to lend the money out on behalf of the depositor, which led to the development of modern banking practices. The goldsmith paid interest on these deposits. Since the promissory notes were payable on demand, the advances to the goldsmith's customers were repayable over a longer time period, this was an early form of fractional reserve banking; the promissory notes developed into an assignable instrument which could circulate as a safe and convenient form of money backed by the goldsmith's promise to pay, allowing goldsmiths to advance loans with little risk of default. Thus, the goldsmiths of London became the forerunners of banking by creating new money based on credit; the Bank of England was the first to begin the permanent issue of banknotes, in 1695.
The Royal Bank of Scotland established the first overdraft facility in 1728. By the beginning of the 19th century a bankers' clearing house was established in London to allow multiple banks to clear transactions; the Rothschilds pioneered international finance on a large scale, financing the purchase of the Suez canal for the British government. The word bank was taken Middle English from Middle French banque, from Old Italian banco, meaning "table", from Old High German banc, bank "bench, counter". Benches were used as makeshift desks or exchange counters during the Renaissance by Jewish Florentine bankers, who used to make their transactions atop desks covered by green tablecloths; the definition of a bank varies from country to country. See the relevant country pages under for more information. Under English common law, a banker is defined as a person who carries on the business of banking by conducting current accounts for his customers, paying cheques drawn on him/her and collecting cheques for his/her customers.
In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking'. Although this definition seems circular, it is functional, because it ensures that the legal basis for bank transactions such as cheques does not depend on how the bank is structured or regulated; the business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business; when looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, not in general. In particular, most of the definitions are from legislation that has the purpose of regulating and supervising banks rather than regulating the actual business of banking.
However, in many cases the statutory definition mirrors the common law one. Examples of statutory definitions: "banking business" means the business of receiving money on current or deposit account and collecting cheques drawn by or paid in by customers, the making
Real estate is "property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water. Also: the business of real estate, it is a legal term used in jurisdictions whose legal system is derived from English common law, such as India, Wales, Northern Ireland, United States, Pakistan and New Zealand. Residential real estate may contain either a single family or multifamily structure, available for occupation or for non-business purposes. Residences can be classified by. Different types of housing tenure can be used for the same physical type. For example, connected residences might be owned by a single entity and leased out, or owned separately with an agreement covering the relationship between units and common areas and concerns. Major categoriesAttached / multi-unit dwellings Apartment or Flat – An individual unit in a multi-unit building; the boundaries of the apartment are defined by a perimeter of locked or lockable doors. Seen in multi-story apartment buildings.
Multi-family house – Often seen in multi-story detached buildings, where each floor is a separate apartment or unit. Terraced house – A number of single or multi-unit buildings in a continuous row with shared walls and no intervening space. Condominium – A building or complex, similar to apartments, owned by individuals. Common grounds and common areas within the complex are shared jointly. In North America, there are rowhouse style condominiums as well; the British equivalent is a block of flats. Cooperative – A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit. Semi-detached dwellings Duplex – Two units with one shared wall. Detached dwellings Detached house or single-family detached house Portable dwellings Mobile homes or residential caravans – A full-time residence that can be movable on wheels. Houseboats – A floating home Tents – Usually temporary, with roof and walls consisting only of fabric-like material.
The size of an apartment or house can be described in square meters. In the United States, this includes the area of "living space", excluding the garage and other non-living spaces; the "square meters" figure of a house in Europe may report the total area of the walls enclosing the home, thus including any attached garage and non-living spaces, which makes it important to inquire what kind of surface area definition has been used. It can be described more by the number of rooms. A studio apartment has a single bedroom with no living room. A one-bedroom apartment has a dining room separate from the bedroom. Two bedroom, three bedroom, larger units are common. Other categoriesChawls Villas HavelisThe size of these is measured in Gaz, Marla and acre. See List of house types for a complete listing of housing types and layouts, real estate trends for shifts in the market, house or home for more general information, it is common practice for an intermediary to provide real estate owners with dedicated sales and marketing support in exchange for commission.
In North America, this intermediary is referred to as a real estate broker, or a real estate agent in everyday conversation, whilst in the United Kingdom, the intermediary would be referred to as an estate agent. In Australia the intermediary is referred to as a real estate agent or real estate representative or the agent
A payroll is a company's list of its employees, but the term is used to refer to: the total amount of money that a company pays to its employees a company's records of its employees' salaries and wages and withheld taxes the company's department that calculates funds and pays these. Payroll in the sense of "money paid to employees" plays a major role in a company for several reasons. From an accounting perspective, payroll is crucial because payroll and payroll taxes affect the net income of most companies and because they are subject to laws and regulations. From a human resources viewpoint, the payroll department is critical because employees are sensitive to payroll errors and irregularities: Good employee morale requires payroll to be paid timely and accurately; the primary mission of the payroll department is to ensure that all employees are paid and timely with the correct withholdings and deductions, that the withholdings and deductions are remitted in a timely manner. This includes salary payments, tax withholdings, deductions from paychecks.
Government agencies at various levels require employers to withhold income taxes from employees' wages. In the United States, "payroll taxes" are separate from income taxes, although they are levied on employers in proportion to salary. U. S. income and payroll taxes collected through deductions are considered to be trust fund taxes, because the employer holds the deducted money in trust for remittance. Before considering the payroll taxes, it is necessary to talk about the basic formula for the Net Pay. From gross pay one or more deductions are subtracted, thus the employee's gross pay minus payroll tax deductions, minus voluntary payroll deductions, is equal to Net Pay. Payroll tax deductions play a critical role and because they are provided by law they are known as Statutory payroll tax deductions; the employer must withhold payroll taxes from an employee's check and hand them over to several tax agencies by law. Payroll taxes include the following: Federal income tax withholding, based on withholding tables in "Publication 15, Employer's Tax Guide" by the Internal Revenue Service – IRS.
The employee pays 6.2 percent of the salary or wage, up to $118,500. The employer pays 6.2 percent in Social Security taxes. If you are self-employed, you pay the combined employee and employer amount of 12.4 percent in Social Security taxes on your net earnings. The employee pays 1.45 percent in Medicare taxes on wage. 0.9% is added for the salary portion bigger than $200,000. The employer pays 1.45 percent in Medicare taxes. If you are self-employed, you pay the combined employee and employer amount of 2.9 percent in Medicare taxes on your net earnings. References include the following publications: Employer's Tax Guide; this publication explains employer's tax responsibilities. It explains the requirements for withholding, reporting and correcting employment taxes, it explains the forms any employer must give to its employees, those employees must give to the employer, those employers must send to the IRS and SSA. This guide has tax tables needed to figure the taxes to withhold from each employee.
This publication supplements Employer's Tax Guide. It contains specialized and detailed employment tax information supplementing the basic information provided in Publication 15. Employer's Tax Guide to Fringe Benefits; this publication supplements Publication 15, Employer's Tax Guide, Publication 15 – A, Employer's Supplemental Tax Guide. This publication contains information about the employment tax treatment of various types of noncash compensation. In the earlier part we have considered payroll taxes related to employee's side. Now it's the moment to talk about the Employer Payroll Taxes Employers are responsible for paying their portion of payroll taxes; these payroll taxes are an expense above the expense of an employee's gross pay. The employer-portion of payroll taxes include the following: Social Security taxes. You can hear people using FICA in their terminology. FICA stands for the Federal Insurance Contributions Act and the FICA tax consists of both Social Security and Medicare taxes.
As we explained earlier both parties pay half of these taxes. Employees pay half, employers pay the other half. Social Security and Medicare taxes are paid both by the employers. In summary together both halves of the FICA taxes add up to 15.3 percent. Any employer is responsible for paying the employer's share of payroll taxes, for depositing tax withheld from the employees' paychecks, preparing various reconciliation reports, accounting for the payroll expense through their financial reporting, filing payroll tax returns; as you see this suite of employer payroll tax responsibilities is far above issuing paychecks to employees.– Companies generate their payrolls at regular interva
Foreign exchange market
The foreign exchange market is a global decentralized or over-the-counter market for the trading of currencies. This market determines the foreign exchange rate, it includes all aspects of buying and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the Credit market; the main participants in this market are the larger international banks. Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. Since currencies are always traded in pairs, the foreign exchange market does not set a currency's absolute value but rather determines its relative value by setting the market price of one currency if paid for with another. Ex: US$1 is worth X CAD, or CHF, or JPY, etc; the foreign exchange market operates on several levels. Behind the scenes, banks turn to a smaller number of financial firms known as "dealers", who are involved in large quantities of foreign exchange trading.
Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the "interbank market". Trades between foreign exchange dealers can be large, involving hundreds of millions of dollars; because of the sovereignty issue when involving two currencies, Forex has little supervisory entity regulating its actions. The foreign exchange market assists international trade and investments by enabling currency conversion. For example, it permits a business in the United States to import goods from European Union member states Eurozone members, pay Euros though its income is in United States dollars, it supports direct speculation and evaluation relative to the value of currencies and the carry trade speculation, based on the differential interest rate between two currencies. In a typical foreign exchange transaction, a party purchases some quantity of one currency by paying with some quantity of another currency; the modern foreign exchange market began forming during the 1970s.
This followed three decades of government restrictions on foreign exchange transactions under the Bretton Woods system of monetary management, which set out the rules for commercial and financial relations among the world's major industrial states after World War II. Countries switched to floating exchange rates from the previous exchange rate regime, which remained fixed per the Bretton Woods system; the foreign exchange market is unique because of the following characteristics: its huge trading volume, representing the largest asset class in the world leading to high liquidity. As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. According to the Bank for International Settlements, the preliminary global results from the 2016 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity show that trading in foreign exchange markets averaged $5.09 trillion per day in April 2016.
This is down from $5.4 trillion in April 2013 but up from $4.0 trillion in April 2010. Measured by value, foreign exchange swaps were traded more than any other instrument in April 2016, at $2.4 trillion per day, followed by spot trading at $1.7 trillion. The $5.09 trillion break-down is as follows: $1.654 trillion in spot transactions $700 billion in outright forwards $2.383 trillion in foreign exchange swaps $96 billion currency swaps $254 billion in options and other products Currency trading and exchange first occurred in ancient times. Money-changers were living in the Holy Land in the times of the Talmudic writings; these people used city stalls, at feast times the Temple's Court of the Gentiles instead. Money-changers were the silversmiths and/or goldsmiths of more recent ancient times. During the 4th century AD, the Byzantine government kept a monopoly on the exchange of currency. Papyri PCZ I 59021, shows the occurrences of exchange of coinage in Ancient Egypt. Currency and exchange were important elements of trade in the ancient world, enabling people to buy and sell items like food and raw materials.
If a Greek coin held more gold than an Egyptian coin due to its size or content a merchant could barter fewer Greek gold coins for more Egyptian ones, or for more material goods. This is why, at some point in their history, most world currencies in circulation today had a value fixed to a specific quantity of a recognized standard like silver and gold. During the 15th century, the Medici family were required to open banks at foreign locations in order to exchange currencies to act on behalf of textile merchants. To facilitate trade, the bank created the nostro account book which contained two columned entries showing amounts of foreign and local currencies. During the 17th century, Amsterdam maintained an active Forex market. In 1704, foreign exchange took place between agents acting in the interests of the Kingdom of Englan