Corporate bond
A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as to ongoing operations, M&A, or to expand business. The term is applied to longer-term debt instruments, with maturity of at least one year. Corporate debt instruments with maturity shorter than one year are referred to as commercial paper; the term "corporate bond" is not defined. Sometimes, the term is used to include all bonds except those issued by governments in their own currencies. In this case governments issuing in other currencies will be included; the term sometimes encompasses bonds issued by supranational organizations. Speaking, however, it only applies to those issued by corporations; the bonds of local authorities are not included. Corporate bonds trade in dealer-based, over-the-counter markets. In over-the-counter trading dealers act as intermediaries between sellers. Corporate bonds are sometimes listed on ECNs. However, vast majority of trading volume happens over-the-counter.
By far the largest market for corporate bonds is in corporate bonds denominated in US Dollars. The US Dollar corporate bond market is the oldest and most developed; as the term corporate bond is not well defined, the size of the market varies by source, but it is in the $5 to $6 trillion range. The second largest market is in Euro denominated corporate bonds. Other markets tend to be small by comparison and are not well developed, with low trading volumes. Many corporations from other countries issue in either US Dollars or Euros. Foreign corporations issuing bonds in the US Dollar market are called Yankees and their bonds are Yankee bonds. Corporate bonds are divided into two main categories High Grade and High Yield according to their credit rating. Bonds rated AAA, AA, A, BBB are High Grade, while bonds rated BB and below are High Yield; this is a significant distinction as High Grade and High Yield bonds are traded by different trading desks and held by different investors. For example, many pension funds and insurance companies are prohibited from holding more than a token amount of High Yield bonds.
The distinction between High Grade and High Yield is common to most corporate bond markets. The coupon is taxable for the investor, it is tax deductible for the corporation paying it. For US Dollar corporates, the coupon is always semi annual, while Euro denominated corporates pay coupon quarterly; the coupon can be zero. In this case the bond, a zero-coupon bond, is sold at a discount; the investor benefits by collecting $100 at maturity. The $20 gain is in lieu of the regular coupon. However, this is rare for corporate bonds; some corporate bonds have an embedded call option that allows the issuer to redeem the debt before its maturity date. These are called callable bonds. A less common feature is an embedded put option that allows investors to put the bond back to the issuer before its maturity date; these are called putable bonds. Both of these features are common to the High Yield market. High Grade bonds have embedded options. A straight bond, neither callable nor putable is called a bullet bond.
Other bonds, known as convertible bonds, allow investors to convert the bond into equity. They can be secured or unsecured, senior or subordinated, issued out of different parts of the company's capital structure. High Grade corporate bonds trade on credit spread. Credit spread is the difference in yield between the bond and an underlying US Treasury bond of similar maturity. Credit spread is the extra yield an investor earns over a risk free instrument as a compensation for the extra risk; the most common derivative on corporate bonds are called credit default swaps which are contracts between two parties that provide a synthetic exposure with similar risks to owning the bond. The bond that the CDS is based on is called the Reference Entity and the difference between the credit spread of the bond and the spread of the CDS is called the Bond-CDS basis. Compared to government bonds, corporate bonds have a higher risk of default; this risk depends on the particular corporation issuing the bond, the current market conditions and governments to which the bond issuer is being compared and the rating of the company.
Corporate bond holders are compensated for this risk by receiving a higher yield than government bonds. The difference in yield reflects the higher probability of default, the expected loss in the event of default, may reflect liquidity and risk premia. Default Risk has been discussed above but there are other risks for which corporate bondholders expect to be compensated by credit spread; this is, for example why the Option Adjusted Spread on a Ginnie Mae MBS will be higher than zero to the Treasury curve. Credit Spread Risk: The risk that the credit spread of a bond, inherent in the fixed coupon, becomes insufficient compensation for default risk that has deteriorated; as the coupon is fixed the only way the credit spread can readjust to new circumstances is by the market price of the bond falling and the yield rising to such a level that an appropriate credit spread is offered. Interest Rate Risk: The level of Yields in a bond
Illinois
Illinois is a state in the Midwestern and Great Lakes region of the United States. It has the fifth largest gross domestic product, the sixth largest population, the 25th largest land area of all U. S. states. Illinois is noted as a microcosm of the entire United States. With Chicago in northeastern Illinois, small industrial cities and immense agricultural productivity in the north and center of the state, natural resources such as coal and petroleum in the south, Illinois has a diverse economic base, is a major transportation hub. Chicagoland, Chicago's metropolitan area, encompasses over 65% of the state's population; the Port of Chicago connects the state to international ports via two main routes: from the Great Lakes, via the Saint Lawrence Seaway, to the Atlantic Ocean and from the Great Lakes to the Mississippi River, via the Illinois Waterway to the Illinois River. The Mississippi River, the Ohio River, the Wabash River form parts of the boundaries of Illinois. For decades, Chicago's O'Hare International Airport has been ranked as one of the world's busiest airports.
Illinois has long had a reputation as a bellwether both in social and cultural terms and, through the 1980s, in politics. The capital of Illinois is Springfield, located in the central part of the state. Although today's Illinois' largest population center is in its northeast, the state's European population grew first in the west as the French settled the vast Mississippi of the Illinois Country of New France. Following the American Revolutionary War, American settlers began arriving from Kentucky in the 1780s via the Ohio River, the population grew from south to north. In 1818, Illinois achieved statehood. Following increased commercial activity in the Great Lakes after the construction of the Erie Canal, Chicago was founded in the 1830s on the banks of the Chicago River at one of the few natural harbors on the southern section of Lake Michigan. John Deere's invention of the self-scouring steel plow turned Illinois's rich prairie into some of the world's most productive and valuable farmland, attracting immigrant farmers from Germany and Sweden.
The Illinois and Michigan Canal made transportation between the Great Lakes and the Mississippi River valley faster and cheaper, new railroads carried immigrants to new homes in the country's west and shipped commodity crops to the nation's east. The state became a transportation hub for the nation. By 1900, the growth of industrial jobs in the northern cities and coal mining in the central and southern areas attracted immigrants from Eastern and Southern Europe. Illinois was an important manufacturing center during both world wars; the Great Migration from the South established a large community of African Americans in the state, including Chicago, who founded the city's famous jazz and blues cultures. Chicago, the center of the Chicago Metropolitan Area, is now recognized as a global alpha-level city. Three U. S. presidents have been elected while living in Illinois: Abraham Lincoln, Ulysses S. Grant, Barack Obama. Additionally, Ronald Reagan, whose political career was based in California, was born and raised in the state.
Today, Illinois honors Lincoln with its official state slogan Land of Lincoln, displayed on its license plates since 1954. The state is the site of the Abraham Lincoln Presidential Library and Museum in Springfield and the future home of the Barack Obama Presidential Center in Chicago. "Illinois" is the modern spelling for the early French Catholic missionaries and explorers' name for the Illinois Native Americans, a name, spelled in many different ways in the early records. American scholars thought the name "Illinois" meant "man" or "men" in the Miami-Illinois language, with the original iliniwek transformed via French into Illinois; this etymology is not supported by the Illinois language, as the word for "man" is ireniwa, plural of "man" is ireniwaki. The name Illiniwek has been said to mean "tribe of superior men", a false etymology; the name "Illinois" derives from the Miami-Illinois verb irenwe·wa - "he speaks the regular way". This was taken into the Ojibwe language in the Ottawa dialect, modified into ilinwe·.
The French borrowed these forms, changing the /we/ ending to spell it as -ois, a transliteration for its pronunciation in French of that time. The current spelling form, began to appear in the early 1670s, when French colonists had settled in the western area; the Illinois's name for themselves, as attested in all three of the French missionary-period dictionaries of Illinois, was Inoka, of unknown meaning and unrelated to the other terms. American Indians of successive cultures lived along the waterways of the Illinois area for thousands of years before the arrival of Europeans; the Koster Site demonstrates 7,000 years of continuous habitation. Cahokia, the largest regional chiefdom and urban center of the Pre-Columbian Mississippian culture, was located near present-day Collinsville, Illinois, they built an urban complex of more than 100 platform and burial mounds, a 50-acre plaza larger than 35 football fields, a woodhenge of sacred cedar, all in a planned design expressing the culture's cosmology.
Monks Mound, the center of the site, is the largest Pre-Columbian structure north of the Valley of Mexico. It is 100 feet high, 951 feet long, 836 feet wide, covers 13.8 acres. It contains about 814,000 cubic yards of earth, it was topped by a structure thought to have measured about 105 feet in length and 48 feet in width, covered an area 5,000 square feet, been as much as 50 feet high, making its peak 150 feet above the level of the pl
Public finance
Public finance is the study of the role of the government in the economy. It is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones; the purview of public finance is considered to be threefold: governmental effects on efficient allocation of resources, distribution of income, macroeconomic stabilization. The proper role of government provides a starting point for the analysis of public finance. In theory, under certain circumstances, private markets will allocate goods and services among individuals efficiently. If private markets were able to provide efficient outcomes and if the distribution of income were acceptable there would be little or no scope for government. In many cases, conditions for private market efficiency are violated. For example, if many people can enjoy the same good at the same time private markets may supply too little of that good.
National defense is one example of non-rival consumption, or of a public good."Market failure" occurs when private markets do not allocate goods or services efficiently. The existence of market failure provides an efficiency-based rationale for collective or governmental provision of goods and services. Externalities, public goods, informational advantages, strong economies of scale, network effects can cause market failures. Public provision via a government or a voluntary association, however, is subject to other inefficiencies, termed "government failure." Under broad assumptions, government decisions about the efficient scope and level of activities can be efficiently separated from decisions about the design of taxation systems. In this view, public sector programs should be designed to maximize social benefits minus costs, revenues needed to pay for those expenditures should be raised through a taxation system that creates the fewest efficiency losses caused by distortion of economic activity as possible.
In practice, government budgeting or public budgeting is more complicated and results in inefficient practices. Government can pay for spending by borrowing, although borrowing is a method of distributing tax burdens through time rather than a replacement for taxes. A deficit is the difference between government spending and revenues; the accumulation of deficits over time is the total public debt. Deficit finance allows governments to smooth tax burdens over time, gives governments an important fiscal policy tool. Deficits can narrow the options of successor governments. Public finance is connected to issues of income distribution and social equity. Governments can reallocate income through transfer payments or by designing tax systems that treat high-income and low-income households differently; the public choice approach to public finance seeks to explain how self-interested voters and bureaucrats operate, rather than how they should operate. Collection of sufficient resources from the economy in an appropriate manner along with allocating and use of these resources efficiently and constitute good financial management.
Resource generation, resource allocation and expenditure management are the essential components of a public financial management system. The following subdivisions form the subject matter of public finance. Public expenditure Public revenue Public debt Financial administration Federal finance Economists classify government expenditures into three main types. Government purchases of goods and services for current use are classed as government consumption. Government purchases of goods and services intended to create future benefits – such as infrastructure investment or research spending – are classed as government investment. Government expenditures that are not purchases of goods and services, instead just represent transfers of money – such as social security payments – are called transfer payments. Government operations are those activities involved in the running of a state or a functional equivalent of a state for the purpose of producing value for the citizens. Government operations have the power to make, the authority to enforce rules and laws within a civil, religious, academic, or other organization or group.
Income distribution – Some forms of government expenditure are intended to transfer income from some groups to others. For example, governments sometimes transfer income to people that have suffered a loss due to natural disaster. Public pension programs transfer wealth from the young to the old. Other forms of government expenditure which represent purchases of goods and services have the effect of changing the income distribution. For example, engaging in a war may transfer wealth to certain sectors of society. Public education transfers wealth to families with children in these schools. Public road construction transfers wealth from people that do not use the roads to those people that do. Income Security Employment insurance Health Care Public financing of campaigns Government expenditures are financed in three ways: Government revenue Taxes Non-tax revenue Government borrowing Money
Real estate
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
Bank
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
Credit union
A credit union is a member-owned financial cooperative, controlled by its members and operated on the principle of people helping people, providing its members credit at competitive rates as well as other financial services. Worldwide, credit union systems vary in terms of total assets and average institution asset size, ranging from volunteer operations with a handful of members to institutions with assets worth several billion U. S. dollars and hundreds of thousands of members. Credit unions operate alongside other mutuals and cooperatives engaging in cooperative banking, such as building societies. "Natural-person credit unions" serve individuals, as distinguished from "corporate credit unions", which serve other credit unions. Credit unions in the US had one-fifth the failure rate of other banks during the financial crisis of 2007–2008 and more than doubled lending to small businesses between 2008 and 2016, from $30 billion to $60 billion, while lending to small businesses overall during the same period declined by around $100 billion..
Public trust in credit unions stands at 60%, compared to 30% for big banks Furthermore, small businesses are eighty percent less to be dissatisfied with a credit union than with a big bank. Credit unions differ from banks and other financial institutions in that those who have accounts in the credit union are its members and owners, they elect their board of directors in a one-person-one-vote system regardless of their amount invested. Credit unions see themselves as different from mainstream banks, with a mission to be "community-oriented" and "serve people, not profit". Credit unions offer many of the same financial services as banks but use different terminology. Typical services include share accounts, share draft accounts, credit cards, share term certificates, online banking. Only a member of a credit union may deposit or borrow money. Surveys of customers at banks and credit unions have shown higher customer satisfaction rates with the quality of service at credit unions. Credit unions have claimed to provide superior member service and to be committed to helping members improve their financial situation.
In the context of financial inclusion, credit unions claim to provide a broader range of loan and savings products at a much cheaper cost to their members than do most microfinance institutions. In the credit union context, "not-for-profit" must be distinguished from a charity. Credit unions are "not-for-profit" because their purpose is to serve their members rather than to maximize profits, so unlike charities and the like, credit unions do not rely on donations and are financial institutions that must make what is, in economic terms, a small profit to remain in existence. According to the World Council of Credit Unions, a credit union's revenues must exceed its operating expenses and dividends in order to maintain capital and solvency. In the United States, credit unions incorporated and operating under a state credit union law are tax-exempt under Section 501. Federal credit unions organized and operated in accordance with the Federal Credit Union Act are tax-exempt under Section 501. According to the World Council of Credit Unions, at the end of 2014 there were 57,480 credit unions in 105 countries.
Collectively they oversaw US$1.79 trillion in assets. WOCCU does not include data from cooperative banks, so, for example, some countries seen as the pioneers of credit unionism, such as Germany, the Netherlands, Italy, are not always included in their data; the European Association of Co-operative Banks reported 38 million members in those four countries at the end of 2010. The countries with the most credit union activity are diverse. According to WOCCU, the countries with the greatest number of credit union members were the United States, Canada, South Korea, Philippines and Mexico, Australia, Thailand and Ireland; the countries with the highest percentage of credit union members in the economically active population were Barbados, Grenada, Trinidad & Tobago, Belize and St. Lucia, St. Kitts & Nevis, Jamaica and Barbuda, the United States and Canada. Several African and Latin American countries had high credit union membership rates, as did Australia and South Korea; the average percentage for all countries considered in the report was 8.2%.
Credit unions were launched in Poland in 1992. Modern credit union history dates from 1852, when Franz Hermann Schulze-Delitzsch consolidated the learning from two pilot projects, one in Eilenburg and the other in Delitzsch in the Kingdom of Saxony into what are recognized as the first credit unions in the world, he went on to develop a successful urban credit union system. In 1864 Friedrich Wilhelm Raiffeisen founded the first rural credit union in Heddesdorf in Germany. By the time of Raiffeisen's death in 1888, credit unions had spread to Italy, the Netherlands, England and other nations; the first credit union in North America, the Caisse Populaire de Lévis in Quebec, began operations on January 23, 1901 with a 10-cent deposit. Founder Alp
Finance
Finance is a field, concerned with the allocation of assets and liabilities over space and time under conditions of risk or uncertainty. Finance can be defined as the art of money management. Participants in the market aim to price assets based on their risk level, fundamental value, their expected rate of return. Finance can be split into three sub-categories: public finance, corporate finance and personal finance. Matters in personal finance revolve around: Protection against unforeseen personal events, as well as events in the wider economies Transference of family wealth across generations Effects of tax policies management of personal finances Effects of credit on individual financial standing Development of a savings plan or financing for large purchases Planning a secure financial future in an environment of economic instability Pursuing a checking and/or a savings account Personal finance may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance and saving for retirement.
Personal finance may involve paying for a loan, or debt obligations. The six key areas of personal financial planning, as suggested by the Financial Planning Standards Board, are: Financial position: is concerned with understanding the personal resources available by examining net worth and household cash flows. Net worth is a person's balance sheet, calculated by adding up all assets under that person's control, minus all liabilities of the household, at one point in time. Household cash flows total up all from the expected sources of income within a year, minus all expected expenses within the same year. From this analysis, the financial planner can determine to what degree and in what time the personal goals can be accomplished. Adequate protection: the analysis of how to protect a household from unforeseen risks; these risks can be divided into the following: liability, death, disability and long term care. Some of these risks may be self-insurable, while most will require the purchase of an insurance contract.
Determining how much insurance to get, at the most cost effective terms requires knowledge of the market for personal insurance. Business owners, professionals and entertainers require specialized insurance professionals to adequately protect themselves. Since insurance enjoys some tax benefits, utilizing insurance investment products may be a critical piece of the overall investment planning. Tax planning: the income tax is the single largest expense in a household. Managing taxes is not a question of if you will pay taxes, but when and how much. Government gives many incentives in the form of tax deductions and credits, which can be used to reduce the lifetime tax burden. Most modern governments use a progressive tax; as one's income grows, a higher marginal rate of tax must be paid. Understanding how to take advantage of the myriad tax breaks when planning one's personal finances can make a significant impact in which can save you money in the long term. Investment and accumulation goals: planning how to accumulate enough money – for large purchases and life events – is what most people consider to be financial planning.
Major reasons to accumulate assets include purchasing a house or car, starting a business, paying for education expenses, saving for retirement. Achieving these goals requires projecting what they will cost, when you need to withdraw funds that will be necessary to be able to achieve these goals. A major risk to the household in achieving their accumulation goal is the rate of price increases over time, or inflation. Using net present value calculators, the financial planner will suggest a combination of asset earmarking and regular savings to be invested in a variety of investments. In order to overcome the rate of inflation, the investment portfolio has to get a higher rate of return, which will subject the portfolio to a number of risks. Managing these portfolio risks is most accomplished using asset allocation, which seeks to diversify investment risk and opportunity; this asset allocation will prescribe a percentage allocation to be invested in stocks, bonds and alternative investments.
The allocation should take into consideration the personal risk profile of every investor, since risk attitudes vary from person to person. Retirement planning is the process of understanding how much it costs to live at retirement, coming up with a plan to distribute assets to meet any income shortfall. Methods for retirement plans include taking advantage of government allowed structures to manage tax liability including: individual structures, or employer sponsored retirement plans and life insurance products. Estate planning involves planning for the disposition of one's assets after death. There is a tax due to the state or federal government at one's death. Avoiding these taxes means that more of one's assets will be distributed to one's heirs. One can leave one's assets to friends or charitable groups. Corporate finance deals with the sources of funding and the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, the tools and analysis used to allocate financial resources.
Although it is in principle different from managerial finance which studies the financial management of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms. Corporate f
