How is Currency Valued? Currency value is determined like any other good or service in a market economy – through supply and demand. Factors affecting supply and demand are regulated by the government through monetary and fiscal policy. History of Currency Value Currency came around several hundreds of years ago as a means to replace…
What is Interest Rate Sensitivity? Interest rate sensitivity is the analysis of fixed income security price fluctuations to changes in the market interest rate. The higher the security’s interest rate sensitivity, the greater the price fluctuations. Understanding Interest Rate Sensitivity Fixed income is one of the major asset classes available to investors. Investors profit from…
What is an Inflationary Gap? In economics, an inflationary gap refers to the positive difference between the real GDP and potential GDP at full employment. The concept was invented by John Maynard Keynes to help identify the economy’s position in the business cycle. Understanding Inflationary Gap An inflationary gap requires two common macroeconomic variables: GDP…
What is an Inflation Swap? An inflation swap is a derivative contract between two counterparties to transfer inflation risk by exchanging fixed cash flows. The mechanics involve one party paying fixed payments, while the other makes payments based on the floating rate on an inflation index. Understanding Inflation Swaps Inflation swaps are a type of…
What is a Qualifying Transaction? A qualifying transaction is a transaction where a private Canadian company issues public stock via a capital pool company. The capital pool company is created to purchase all of the outstanding shares of the private Canadian company; in doing so, the private Canadian company becomes a subsidiary of the capital…
What is Pari-Passu? Pari-passu is a Latin term that means “ranking equally and without preference.” Applied in a legal context, pari-passu means that multiple parties to a contract, claim, or obligation are treated the same, “ranking equally and without preference.” Uses and Applications of the Pari-Passu Principle Lending The term pari-passu is popular in the…
What is Income Tax? Income tax is a tax that is imposed by governments on individuals and businesses with respect to income or profits earned by those individuals and businesses. To determine the amount of income tax that should be paid, individuals and businesses must file an income tax return every year. How Income Taxes…
What are Income Stocks? Income stocks are equity financial securities that pay regular and predictable dividends. They are purchased with the purpose of generating a steady stream of dividend flows. In addition, investors hope that the dividend flows will increase over time. Income stocks are typically derived from the real estate, energy, or utilities industries….
What is an Income Property? Income property is a property or piece of real estate that is bought and developed with the purpose of generating income by renting or leasing the property to others. Furthermore, income properties offer the secondary benefit of asset appreciation, where the value of the property or piece of real estate…
What is the Emergency Banking Act of 1933? The Emergency Banking Act of 1933 was enacted during the Great Depression to alleviate the economic downturn and stabilize the U.S. financial system. History of the Emergency Banking Act During the Great Depression, many loans that were made by banks in the 1920s were not repaid. As…
