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15 November 2011

What is Compound Interest?

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What is Compound Interest?
Getting out of debt relies on many things but most of all it relies on you doing your research and working out how the system works and where you can start saving money. Knowledge is power and the more you know about loans and debt the more money you can save and the better off you will be financially. Learning about compound interest for instance can help you to save money on your loans and can help you to better choose your bank accounts.
Firstly then – what is compound interest? Well essentially the term compound interest means interest that increases exponentially over time – interest that is added to the ‘principle’ amount of money in the pot so that the next year’s interest comes out of the combined amount.
To make it it a little simpler imagine you have a bank account worth $100 and it was in a savings account with 2% interest. After the first year that money in the account would be $102, but after the second year of compound interest it would be $104.04 – because 2.04 is 2% of $102. If the account didn’t have compound insurance then at the end of the …

5 September 2011

The Debt Clock

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The Debt Clock
The debt clock is not just a metaphor – there actually is a real debt clock running on Sixth Avenue in Manhattan. The national debt clock (as it’s formally known) is a clock that shows a running total of the United State’s gross national debt. This is shown in a dot-matrix display that constantly updates to stay up to the minute. It is billboard size and acts as a constant reminder of the national date that the United States faces. It really drives this point home too with an additional feature – the debt clock not only shows the overall debt owed by the US, but also the amount of debt owed by each American family.
The debt clock was the brain child of real estate developer Seymour Durst who felt the need to highlight the rising national debt at the time. In 1989 he did this by sponsoring the installation of the first debt clock erected on 42nd street near Times Square. Interestingly during 2,000 to 2,002 the debt clock was switched off as the debt began to fall.
In 2004 the initial debt clock was taken apart and replaced by the debt clock now running on Sixth Avenue …

18 August 2011

The World Bank

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The World Bank
The World Bank is an international financial institution which lends money to developing countries so that they can carry out capital programmes – building the infrastructure necessary for society, economy or enterprise to operate. This might mean things like cars, roads, homes, council tax,power grids and other physical structures; or it might mean things like organization, financial institutions, law enforcement etc for governmental infrastructure. This then can provide those developing countries with the capital they need to facilitate their growth and organization. The bank itself will oversee many philanthropic strategies – such as poverty reduction strategies and the ‘clean air initiative’ to help improve air quality in cities.
The World Bank is made up of two groups the ‘International Bank for Reconstruction and Development’ and the ‘International Development Association’. The ‘World Bank Group’ is a term used to include these two institutions as well as three others (the International Finance Corporation, Multilateral Investment Guarantee Agency and International Center for Settlement of Investment Disputes).
The World Bank was formed at the Bretton Woods Conference in 1944 and is based in Washington D.C. It is custom for the World Bank to be headed by an American, and the current president is Robert …

27 July 2011

Debt Yield

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Debt Yield
Debt is a complex matter and there are many different terms and systems that you need to understand in order to have a firm grasp on the matter. However failure to understand debt can make the whole subject much more fraught and a lot of the difficulties that people have with debt come from a lack of understanding. No matter which side of the fence you are on – whether you are the lender or the borrower – understanding the various terms involved in debt is an important step to managing it more effectively.
One such term is ‘debt yield’ which is a phrase that we hear a lot but that no all of us fully understand. Here we will look at what debt yield is and how it affects us.
 
What is Debt Yield?
 
Yield means the return on an investor’s capital. In other words it is how much the lender expects to make on the investment. This is usually expressed annually written as a ratio/percentage alongside the value of the investment.
For instance in the case of investing in stock the yield would be how much you make in annual dividends. So in other words if you were to own a …

27 June 2011

Debt To Equity Ratio

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Debt To Equity Ratio
The debt to equity ratio is the ratio of shareholders’ equity to debt used to finance the company those shares are for. It’s a relatively complex concept, but it is central to understanding how to value companies and shares and to understanding how businesses are financed. To understand this better though, we need to understand precisely what the term ‘equity’ means.
Essentially equity is the value of a company when put on paper. That is the net money that the company owns made up of things like – how much money the company put in originally, and how much profit it holds currently which it has not yet paid out to the owners as dividends. This does not include assets, and it does not include and various other things are also excluded such as ‘accounts receivable’ (the amount of money customers owe to the company). Essentially this means that the equity is the net value of the company, and it is what you own when you buy a share. One way to calculate the equity of a company then should be the value of the share, times the number of share holders. There are various kinds …

20 June 2011

Debt Ceiling

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Debt Ceiling
The term debt ceiling refers to the maximum borrowing power of a government i.e. country. For many this is an abstract concept which does not resonate as the serious and pressing matter that it is. Essentially when the Federal Government experience large deficits through spending more than it is taking in (through taxation), then it must be financed by debt. In other words the government, like you or I, needs to borrow money from time to time in order to finance its various projects – cleaning up the schools or the streets, or implementing new programmes meant to raise money. However if the government is unable to issue more debt or to borrow more money then this means that it has hit the debt ceiling, and that in turn means it can’t go ahead with the various expenditures. If the debt ceiling can’t be extended and the government can’t cut spending to lower the deficit, then it will.
 
Of course part of the question here is – where does the government get this money and who is doing the lending? And how high exactly is this debt ceiling?
Well the answer is that there are many lenders and many …

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