Month: May 2020

An emergency fund is a readily available source of assets to help people navigate financial dilemmas, such as the loss of a job, a debilitating illness, a major repair to home or car—not to mention the kind of major national crisis the coronavirus pandemic has created. The purpose of the fund is to improve financial security by creating a safety net of cash or other highly liquid assets that can be used to meet emergency expenses. It also reduces the need to either draw from high-interest debt options—such as credit cards or unsecured loans—or undermine your future security by tapping retirement funds. read more

The time value of money (TVM) is the concept that money you have now is worth more than the identical sum in the future due to its potential earning capacity. This core principle of finance holds that provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also sometimes referred to as present discounted value.

Junior debt is debt that has a lower priority for repayment than other debt claims in the case of default. Junior debt is considered to be a type of subordinated debt.

The time value of money (TVM) is the concept that money you have now is worth more than the identical sum in the future due to its potential earning capacity. This core principle of finance holds that provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also sometimes referred to as present discounted value.

Junior debt is debt that has a lower priority for repayment than other debt claims in the case of default. Junior debt is considered to be a type of subordinated debt.

Seller Financing is a real estate agreement in which the seller handles the mortgage process instead of a financial institution. Instead of applying for a conventional bank mortgage, the buyer signs a mortgage with the seller.

A sinking fund is a fund containing money set aside or saved to pay off a debt or bond. A company that issues debt will need to pay that debt off in the future, and the sinking fund helps to soften the hardship of a large outlay of revenue. A sinking fund is established so the company can contribute to the fund in the years leading up to the bond’s maturity.

The gross-income test is one of the five necessary tests that dependents must pass before they can be claimed as such in the United States. The gross-income test mandates that dependents cannot earn more than a certain amount of income each year. Furthermore, this test only applies to potential dependents that are over the age of 18 or over the age of 23 if the candidate in question is a full-time student.1

Option pricing theory uses variables (stock price, exercise price, volatility, interest rate, time to expiration) to theoretically value an option. Essentially, it provides an estimation of an option’s fair value which traders incorporate into their strategies to maximize profits. Some commonly used models to value options are Black-Scholes, binomial option pricing, and Monte-Carlo simulation. These theories have wide margins for error due to deriving their values from other assets, usually the price of a company’s common stock. read more

The Federal Poverty Level (FPL), or the poverty line is an economic measure that is used to decide whether the income level of an individual or family qualifies them for certain federal benefits and programs. The FPL is the set minimum amount of income that a family needs for food, clothing, transportation, shelter, and other necessities.