Coupon Pass

  

If you just blew a ton of money on a new car to impress your friends, your finances may not be so stable. Because of this, you may have to sell some of your assets or purchase an investment that will yield the type of income you need to sustain your new massive payment.

The Federal Reserve is responsible for maintaining the stability of the market, just like you are responsible for maintaining the stability of your finances. Because of this, we have coupon passes.

When a coupon pass occurs, the Fed is buying treasury securities from dealers to keep reserves stable.

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Finance: What are the tax implications o...0 Views

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Finance allah shmoop What are the tax implications of zero

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coupon bonds All right well from the investors side you

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think that a zero coupon bond would simply have attacks

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being paid when the bond and interest payments fully mature

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a goal that we hear it shmoop clearly have not

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yet achieved That is you buy a zero for half

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or two thirds or three force of its par value

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and something like that You get no interest or any

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payments of any kind along the way for years But

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then at the end you get par like three thousand

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box or whatever amount of the zero yabba like you

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spent two grand and it matures and pars three grand

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cause he had three bonds and then you're done well

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At that point you pay a tax right and you

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think it might be assessed as a long term game

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kind of tax because you bought and held it over

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a year just like you would have you bought in

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equity and held it on five six seven years and

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then sold it some gain At that point in an

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equity you'd be taxed the long term gains cheaper tax

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treatment iaea You know when you sold and turned into

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cash but oh so not the case with zero coupon

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bonds instead with zero coupon bonds taxes are paid on

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the annual imputed maturity of the bond itself such that

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if you paid say five hundred bucks for a zero

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coupon bond matures with all payments included at a thousand

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dollars five years later well you'd be paying tax on

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an imputed gain of one hundred bucks a year which

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would comprise basically a bundled gain of notional principal gagne

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plus whatever imputed interest was included in the bond And

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that is tax as ordinary income not long term game

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that is you pay the higher tax rate because well

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it's a bond and its interest on the bonds you're

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paying on so things air re calculated annually And that

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hurts So you don't really own anything for more than

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a year before uncle sam comes by tio you know

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pick your pocket You actually lose cash along the way

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with zero coupon bonds and then get a whole bunch

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Each of it vomited back to you at the end

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On top of everything zeroes are riskier than normal bonds

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because they pay nothing along the way and well all

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bets iran that they eventually pay off fully at the

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end But you know you never know So given everything

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you'd better be sure you're getting a big premium for

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buying a zero coupon bond over a normal one If

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you do some day you want to go in this 00:02:19.8 --> [endTime] direction you know putting your nuts to work

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