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Some Important Things to Know Before Investing in Municipal Bonds

Taxation of Municipal Bond Interest

The interest on tax-exempt municipal bonds is exempt from federal income taxation, an important consideration to bond buyers, especially those in the higher income tax brackets. State tax treatment is an important consideration to bond buyers as well, since the interest on tax-exempt municipal securities is exempt from state income taxes in the state where they are issued.  Most municipal bonds are tax-exempt, but some are not (i.e., they are fully taxable). The offering document for a bond issue (its “Official Statement”) will state if the bonds are tax-exempt or taxable. In general, if the bonds are issued by a municipality for a public purpose (e.g., to construct a public school building) they will be tax-exempt. If the bonds are issued by a municipality for “private activity” purposes, they will be taxable bonds and the income from these municipal bonds will be fully taxable for both state and federal income tax purposes.

Current rules on the exemption of municipal bond interest varies state-to-state. In most states, bonds issued by the state or one of its political subdivisions are exempt from personal income taxation, but not the interest on bonds issued by another state or one of its political subdivisions.

Serial Bonds
Serial bonds allow issuers (i.e., municipalities) to structure their debt by issuing bonds in varying principal amounts with consecutive maturity dates. For example, an issuer might sell $1,000,000 in bonds with annual maturities of $100,000 per year for 10 consecutive years. As serial bonds mature the issuer is able to repay the total principal over time (rather than all at once), and as such will be better able to match revenue projections with debt service payments.

Term Bonds
Single maturity or “term bonds” are debt instruments where the entire principal amount of the bond is paid on the maturity date. For example, an issuer might sell $1,000,000 in bonds, all stated to mature in 20 years. Prior to the maturity date, however, there may be mandatory sinking fund redemptions of this bond. A schedule of the mandatory sinking fund redemptions will be shown in the official statement for the bond issue. Thus, portions of this 20-year bond will be retired before the 20th year in amounts and on the dates set forth in the official statement.


Par Bonds, Discount Bonds and Premium Bonds
A par bond is a bond sold at its face (or “par”) amount (e.g., a $5,000 par bond would be sold for $5,000). A discount bond is a bond with a below-market coupon rate that is sold at a price less than par, and a premium bond is a bond with an above-market coupon rate that is sold above par. The decision to issue discount or premium bonds (or some combination of both) is made by the underwriter of the bond issue for marketing purposes. After the initial offering, changes in market rates will affect the prices of bonds, thereby making them par, discount or premium bonds depending on their coupon rate and the market rate for the bond at the time of sale. Contact your accountant or financial advisor with respect to the taxation of the discount or premium on your bonds.


Callable Bonds
Municipal bonds providing for the optional redemption or “call” by the issuer prior to its stated maturity date are known as callable bonds, and are generally callable at any time upon 30-days notice after a certain numbers of years have elapsed from the date they were issued (typically, 10 years). The decision to call the bonds is solely at the option of the municipal issuer. If the issuer decides to call its bonds, the owner will be paid back at that time, and no future interest payments will be received. Premiums can be applied to the early redemption of callable bonds, although most municipal bonds are currently callable at par. Thus, all or a portion of an issuer’s callable bond issue may be redeemed prior to the stated maturity of the bond issue. The official statement for a callable bond will describe the method of redemption.


Yield to Maturity and Yield to Call

The yield to maturity is the return to the purchaser of a fixed coupon rate bond at a certain price. For example, a 20-year 5.00% non-callable bond purchased at 105% of par will have a yield to maturity of 4.615% (the yield to maturity is less than the coupon rate since the purchaser is paying more than par for this bond). If the same bond was purchased at 95% of par (i.e., at a discount), its yield to maturity would be 5.412% (the yield to maturity is greater than the coupon rate since the purchaser is paying less than par for this bond). The yield to call is the return to the purchaser of a callable bond assuming it is called on its call date. For example, if the 20-year 5.00% premium bond purchased at 105% is callable in 10 years, the yield to call would be approximately 4.377% (i.e., less than its yield to maturity). When investing in bonds it is important to know the yield to maturity (YTM) or yield to call (YTC) in order to know the actual return of the investment – don’t just look at the coupon rate. Discuss this with your securities broker or financial advisor.

Credit Enhancements
Some municipal bonds are issued with “credit enhancement” which means that a third party promises to pay the principal and interest on the bond if the issuer fails to do so. Examples of such third parties are (1) a bank letters of credit, (2) a bond insurance company, (3) credit programs of federal or state governments or federal agencies, or (4) state school credit guarantees. With credit enhancement, an issuer can expect to sell its bonds at a lower yield to the investor due to the higher creditworthiness of its debt. Discuss any credit enhancements with your securities broker or financial advisor.


Zero Coupon Bonds
Zero coupon bonds are bonds that are sold at a discount with no periodic interest payments. All interest is effectively paid at maturity when the purchaser receives the full principal amount of the bond.


Capital Appreciation Bonds
Capital appreciation bonds (CABs) are bonds that are sold at a discount that provide for the reinvestment of the initial investment at a compounded rate until the maturity, at which time the investor receives the total par amount (or “future value”) of the CAB. CABs are zero coupon bonds.

Variable Rate Bonds
Variable rate demand obligations (VRDOs) are bonds where the interest rate varies, or changes periodically (e.g., weekly or monthly). VRDOs are typically sold with high minimum denominations (e.g., $100,000). The VRDO structure allows the securities to be sold at par. They are also known as “floating rate” bonds.



Stanley Stone is the president of He is a Certified Independent Public Finance Advisor (CIPFA) and an associate member of the National Association of Bond Lawyers. Stanley loves the theater and attends many plays, operas and ballets each year in New York City.

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What makes Goodman’s Air Handlers so Popular?

1252872936017-1820635316With increasing global warming, temperatures have risen at a drastic rate over the years and the rise just seems to be never ending. Resultantly, summers everywhere have become hotter and more uncomfortable. Temperature does affect people’s moods and lifestyles. Hence to maintain smoothness in everyday life, there has to something that keeps the heat at bay. No other name except Goodman’s strikes at this great hour of need. Goodman’s have been in the market for considerably a long time and are now among the topmost brands in the field. Goodman’s products and offers are designed to suit the needs of every kind of household.

For the most affordable prices in the variety of heating as well as cooling systems, Goodman is unbeatable. Everything from comfort to cost-efficiency is kept well in mind while the manufacturers of Goodman’s work to produce their machines and equipments. Customer satisfaction is guaranteed when you shop for goods at Goodman’s. Air Handlers are one of the specialities of the company. Air Handlers are generally required in households as well as offices.

Goodman’s Air Handlers not only purifies the air but also ensures a highly minimised presence of bacteria and germs in the surroundings. Also referred to as HVAC air handlers, these electrical units are installed in the rooftops or even in the backyard. Ground floors are also preferred to fix Goodman’s Air Handlers. Goodman’s Air Handlers provides the customer with skilfully manufactured equipments which are durable and long-lasting. Some major electrical devices coming along with Goodman’s Air Handlers are humidifiers, filters, cooling and heating elements, blowers, and mixing chambers.

Air handling devices from Goodman’s also maintains the rule of reusability and recycles by its unique recovery device. They not only condition the air but also recover the lost air by producing fresh oxygen by its pollution-free mechanism. In such a way, the environmental factor is well-maintained.

Least or equal to nil noise is produced while the functioning of air handlers from Goodman’s. Hence one can peacefully work or rest while the conditioning is going on.

Among the best features of Goodman’s products is that they are amazingly reliable. Installation is easy once the purchase has been made. In comparison to the competing names, Goodman’s products are more long-lasting and effective. They are also easily operative.

Customers will not have to worry about money when they buy air handlers from Goodman’s because they are most cost-efficient brand in today’s market. It is just once that they have to pay, but with such increasingly pleasing benefits coming with it, no one will fail to choose Goodman’s products. The next time you have to buy air handlers or such heating and cooling systems, go nowhere but the online stores of Goodman’s to get complete relief from the harsh dry weathers outdoors.

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Tips for Couponers

Be considerate! When you go to the store with your bulging folio of coupons, at the very least be organized so that the cashier and the people behind you can at least have the comfort of knowing you’d planned ahead to make the checkout experience as fluid as possible.

Don’t be rude! I recognize that this is the same thing as “be considerate,” but now I mean, don’t antagonize the teller. We all know how much work you’ve put into cutting up your coupons, but if something doesn’t work, let it slide. It happens. Weigh the significance of a few cents or bucks.

Just a few tips from a bystander! Happy shopping! Score those deals!

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Now’s the Time to Score Summer Deals!

As you’re all making your summer to-do lists, now’s the time to be on the prowl for those special deals to get you out in the sun. With all the deals on LivingSocial and Groupon, there really is no reason for you to be paying full price on any summer activity, especially if you’re the type to score passes for the summer to all the must-attend events like baseball games, water parks, etc.

Your mission is to find the deal of the summer, come back and post a link here!

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Your Children Will Be Storing Their Data Like This

Unless you happen to be a molecular scientist, molecular physics just got interesting. Especially to IT representatives in all areas of the business, molecules now hold a very vital key to unlocking ultra-efficient data storage. Soon, data center operators will be able to store insane amounts of data in specialized layers of molecules. It might sound like science fiction, but recently the concept has become fact. It’s called “molecular memory,” and it could mean that within ten years, IT providers will be saving at least 1000TB of memory in a square inch of space. It’s anticipated that the subsequent result will be more energy- and space-efficient data centers worldwide.

The special molecule used in the research, which took place in an MIT lab, was actually first developed in India by chemists at the Indian Institute of Science Education and Research (IISER). It’s an encouraging prospect that, if nothing else, will progress the discovery of even more real and viable alternatives to traditional data storage systems.

How It’s Done

With the recent leap forward in the technology, researchers have made inroads in specific manufacturing phases that will shave off manufacturing costs as well as produce a product that will be kept cool more easily. This last part will be a selling point to IT personnel who are constantly on the lookout for effective ways to control the heat levels in their data centers.

Molecule Memory Revealed

The secret is manipulating the magnetic conductivity of the special molecule. Each individual molecule takes the place of a binary one or a zero depending on its magnetic state. The end product is store more data in a limited amount of space.

What Tomorrow Holds for “Molecular Memory”

As facility technicians across the globe strive to cut costs and boost performance, this technology is both timely and invaluable. Moodera is hopeful that the results of the research will generate interest in developing more memory solutions.

The team of researchers at MIT was led by Jagadeesh Moodera, who predicts that the end version of the “molecular memory” device will be available on shelves by 2023. Hopefully these systems will ultimately take the place of traditional SSD storage devices worldwide and will dramatically decrease energy usage and waste.