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An investment is a placement or commitment of money or capital in a way intended to gain profit or interest, as by purchasing property, securities or bonds. As noted above, managements are compelled to invest "all monies…not required to be kept liquid for purposes of distribution…in such a manner as to require the payment of interest on the money at the highest possible rate reasonably available, taking account of safety liquidity and yield." Liquidity is the quality of being readily convertible into cash without substantial transaction costs. Security is the quality of assurance that the investment expectation will be fulfilled in a timely fashion. Yield is the measure of effective return on an investment, usually expressed as a percent. Many communities maintain written investment policies that serve as a guideline in making investments of short-term funds. These policies delineate investment procedures and considerations and define levels of acceptable risk. Frequently, the policies identify the financial institutions that have satisfied the community's criteria for secure deposits. In addition, the policies generally include specific information about delegation of authority, internal controls, ethics and conflict of interest. Ultimately, the standard to which a management is held in making investments is the "prudent person" standard. A management should always remember to weigh the risk of financial loss when making municipal investments. When investing a municipality's money, the management should carefully avoid high-risk or speculative investments, even if legally permitted. identify the various institutions into which municipal funds may be deposited. A management who deposits monies into these institutions will not be personally liable for any loss of money due to the failure of the institutions. Notwithstanding, a prudent management must make certain that deposits and investments are sufficiently insured, adequately collateralized and invested in institutions that have been researched for stability and safety. A Certificates of Deposit, generally known as a CD, is a written acknowledgement by a commercial bank, savings and loan institution or mutual savings bank containing a promise to pay interest at a specified rate for a fixed period of time for funds deposited in the institution. CDs provide a useful instrument for short-term investments, usually more than 7 days. They are available in almost any denomination, although most have a minimum amount. The bank pays interest on the certificate's face value, and the interest accrues on a 360-day or 365-day basis. Rates vary depending on the length of time for which the certificates are issued, the amount of money deposited and the prevailing market rate. Rates also vary among banks, making it important for managements to obtain quotes from a number of banks before making a purchase. Treasury bills are bearer obligations of the Government that are issued on a discount basis; that is, a purchaser buys the instruments at less than the face value and receives the face value upon redemption. The difference between the purchase price and the redemption price is the interest income. Treasury bills are backed by the full faith and credit of the Government and are considered the safest investment. Because of their relative safety and marketability, T-Bills, as they are called, generally provide lower yields than do comparable short-term investments. Funny Picture, Video, wallpaper, games Free Study Material For Student Free Tips How To Earn Money Online Without Any Investment
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