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This liability can make zero-coupon bonds less tax-efficient for some investors. Commitment: Zero-coupon bonds are intended to be a long-term commitment, usually spanning 10 to 30 years. For ...
Zero coupon bonds have a duration equal to the bond's time to maturity, which makes them sensitive to any changes in the interest rates. Investment banks or dealers may separate coupons from the principal of coupon bonds, which is known as the residue, so that different investors may receive the principal and each of the coupon payments.
For example, if a zero-coupon bond with a $20,000 face value and a 20-year term pays 5.5% interest, the interest rate is knocked off the purchase price and the bond might sell for $7,000.
A group of mortgages could be split into principal-only and interest-only bonds. The "principal-only" bonds would sell at a discount, and would thus be zero coupon bonds (e.g., bonds that you buy for $800 each and which mature at $1,000, without paying any cash interest).
Taxpayers who hold real estate as inventory, or who purchase real estate for re-sale, are considered "dealers". These properties are not eligible for Section 1031 treatment. However, if a taxpayer is a dealer and also an investor, he or she can use Section 1031 on qualifying like properties.
A levy imposed by the IRS on profits made from the sale of an asset, such as stocks or real estate — that profit is considered taxable income. Long-term capital gains A tax on assets held for ...
A risk-free bond is a theoretical bond that repays interest and principal with absolute certainty. The rate of return would be the risk-free interest rate . It is primary security, which pays off 1 unit no matter state of economy is realized at time t + 1 {\displaystyle t+1} .
Savings bonds vs. corporate bonds. While the government issues U.S. savings bonds, corporate bonds are sold by companies looking to raise funds to build their capital. The company offers fixed or ...