Alternate name: Cat bond Companies use these bonds to protect themselves from financial losses in major natural disasters like hurricanes and earthquakes. Investors buy these high-yield bonds and hope that the underlying disasters won’t occur. If the disasters don’t happen, they can keep the profits without paying to cover the company’s disaster-related losses. How Do Catastrophe Bonds Work? To understand how catastrophe bonds work, it may be helpful to start with a refresher on how bonds work in general....

The IRS notes that ordinary expenses are “common and accepted in your industry,” while necessary expenses are those that are “helpful and appropriate for your trade or business.” However, some types of common expenses, like those that factor into the cost of goods sold, are not considered ordinary and necessary and fall into different categories. And while many types of business expenses can be ordinary and necessary, the specifics can vary greatly among businesses....

None of these rules involves a limit as to how much money you can convert to a Roth account or to your income, but they can affect the tax-free treatment of your withdrawals in retirement. Roth IRA Conversions Are Unlimited Roth IRAs have contribution limits that hinge on your income and filing status, but these limits don’t apply to conversions. They only affect direct contributions. Roth conversions were limited to taxpayers with adjusted gross incomes (AGIs) of less than $100,000 before 2010, but the Tax Increase Prevention and Reconciliation Act eliminated this rule....

Alternate name: Equity index futures For example, a Micro E-mini S&P 500 Futures (MES) contract is worth $5 per index point. Imagine that Joe sells one MES contract to Ann. On the contract date, the S&P 500 was trading at 4,100. On the settlement date, the S&P 500 traded at 4,101. The S&P 500 may have moved much more than one point in between the contract and settlement dates, but on the settlement date, Ann owes Joe $5....

These new bonds generate one payment at maturity and no interest payments, categorizing them as so-called zero-coupon bonds. In the case of a 10-year Treasury bond making semiannual interest payments, the bond would be divided into 20 individual bonds for the 20 interest payments, and another bond for the repayment of the bond principal. These 21 new bonds are STRIPS, with all of them having fixed, one-time payments on fixed dates....

Alternate name: Liberty bonds In the U.S., war bonds came into prominence during World War I, when the country began selling Liberty Bonds. The bonds were marketed to play on Americans’ sense of patriotic duty, with slogans such as, “If You Can’t Enlist, Invest. Buy A Liberty Bond” and “Defend Your Country With Your Dollars.” Even Charlie Chaplin and other famous actors appeared in short films encouraging the purchase of war bonds....

You must give W-2 forms to your employees by the end of January of the year following the tax year. For example, if you are reporting on employee income for 2022, you must give it to them by January 31, 2023. January 31 is also the deadline to file W-2 forms for all of your employees with the IRS and SSA. Where To Send Copies A W-2 form is a multipart form:...

Even if you are still searching for a job that allows you to be economically self-sufficient, you can still take steps to work towards becoming financially independent. Learn more about financial independence and how you can take steps to get there more quickly. What Does It Mean To Be Financially Independent? If you are financially independent, you are responsible for your own expenses. You no longer rely on a parent, guardian, or another family member to provide money for you or cover your bills....

What Does Being Past Due Mean? When an account is considered past due, that means the minimum required payment was not applied to the account as of the last payment due date. Your account technically becomes past due the moment after you miss the payment. Some credit card issuers immediately apply a late fee to your credit card. The account remains in the past due status until you make the required minimum payment to bring the account current....

For example, a credit card company’s credit agreement would be provided when you sign up for a credit card. The agreement would specify the terms of the credit card and the relationship between you and the creditor, such as: The annual percentage rate (APR) for purchases, balance transfers, direct deposits, and cash advances Information on how that interest is calculated and what balances are subject to interest When a penalty APR applies and what the amount is The minimum interest charge Any account fees or transaction fees such as a balance transfer fee, ATM cash advance fee, or check cash advance Penalty fees Payment due date and when interest begins to accrue How the card issuer calculates balances outstanding Rights of the creditor to amend the agreement The manner by which you can obtain funding, such as purchases, balance transfers, or cash advances, as well as a definition of each type of credit extended Details about transactions made in foreign currencies Information and disclosures about any promotional rates Information about how you should make payments when payments are due, and in what amount...

Definition and Example of a Maximum Loan Amount The maximum loan amount puts a cap on the amount of money a lender authorizes you to receive when you’re approved for a loan. A lender will likely consider your credit score, debt-to-income ratio, and other factors when determining your maximum loan amount. This process is called underwriting, and it helps lenders evaluate how big of a loan you’re actually able to repay so they can figure out how much money they’re willing to let you borrow....

The beta for the market is exactly 1. If the mutual fund beta is 1.1, this indicates that, when the benchmark index is up, the fund has historically performed 10% better than that index. Conversely, when the benchmark index is down, a mutual fund with a beta of 1.1 can be expected to decline by 10% more than the index. A fund can also have a beta that is lower than the benchmark index....

Definition and Example of a Nonperforming Loan Most banks and lenders in the U.S. consider a loan to be nonperforming when a borrower hasn’t made principal and interest payments for more than 90 days. Once a loan becomes nonperforming, the chance of default by the borrower increases significantly. Acronym: NPL For example, let’s say you take out a $10,000 personal loan to cover a medical bill. You agree to make a $1,000 payment by the last day of every month....

Alternate name: Index fund For example, the Vanguard Growth Index Fund Admiral Shares (VIGAX) tracks the CRSP U.S. Large Cap Growth Index. VIGAX holds 265 stocks, including Apple, Microsoft, Google, and other well-established companies. Because it buys stocks listed on the index, the fund doesn’t need active involvement unless the index changes. How Passively Managed Funds Work An investment fund is a company with a management team. The team picks an index to follow based on the strategy and goals of the fund, purchases the stocks or other investments that will make up the holdings, and offers shares of the fund to investors....

Creating a pet trust is something you might consider to make sure your pets will be taken care of if something were to happen to you. It might also be a good idea if you have a particularly long-lived pet, such as a parrot or iguana. Similar to creating a trust with human beneficiaries, it’s important to understand how a pet trust works. Definition and Examples of a Pet Trust A pet trust is a legal arrangement that allows you to provide for the care and maintenance of one or more pets should they outlive you....

Or perhaps you’ve been asked for a list of references after you had an interview with a company. What exactly are professional references? Who should you use to provide those references? What Are Professional References? A professional reference is a recommendation from a person who can vouch for your qualifications for a job. Employment and Professional References These references can be employment references such as those from previous employers or co-workers, as well as references from people such as clients or business contacts who know you on a professional basis....

Learn more about providing proof of funds and what it should look like. What Is a Proof of Funds Letter? A proof of funds letter provides evidence that a homebuyer has the money for a down payment and closing costs. Any proof of funds needs to list the following items, preferably on official letterhead from the institution where the funds reside: The dateThe name of account holderThe balance of funds on deposit...

A PMSI is often used by commercial lenders and retailers who sell goods on credit. If you take out point-of-sale financing at some point in the future, your lender may ask you to agree to a PMSI. Definition and Example of a Purchase Money Security Interest (PMSI) A PMSI gives a lender the right to repossess collateral if a borrower defaults on a loan or financial obligation. A PMSI is often used for commercial lending or by retailers who sell goods on credit....

From the Broker’s Point of View To explain, suppose you are a broker, under contract with an owner to help sell their house. You agree to list it for a certain time, and to work with agents to show it to many people. After months, you end up finding a willing buyer, but there’s a process of back and forth before landing on a final sale price. In the meantime, your listing contract with the owner reaches its end date....

IncomeAssetsPropertyTransactionsOther economic activity There are two overarching types of tax bases: narrow and broad. A narrow tax base is seen as non-neutral and inefficient because less is taxed. On the other hand, a broad tax base is viewed more favorably as it taxes more, which reduces tax administration costs and allows for more revenue to be raised at lower tax rates. Broad vs. Narrow Tax Bases Broad tax bases reduce tax administration costs and make it possible to raise more revenue at lower tax rates....