Archive-name: investment-faq/general/part3
Version: $Id: faq-p3,v 1.35 1996/09/18 12:47:54 lott Exp lott $
Compiler: Christopher Lott, cml@cs.umd.edu

This is the general FAQ for misc.invest, part 3 of 7.

Compilation copyright (c) 1996 by Christopher Lott.  Use and copying
of this information, distribution of the information on electronic
media, and preparation of derivative works based upon this information
are permitted, so long as the following conditions are met:
    + No fees or compensation are charged for this information,
      excluding charges for the media used to distribute it.
    + Proper attribution is given to the authors of individual articles.
    + This copyright notice is included intact.

Disclaimer: This information is made available AS IS, and no
warranty is made about its quality or correctness.

-----------------------------------------------------------------------------

Subject: Bonds - Treasury Debt Instruments
Last-Revised: 15 Apr 1995
From: a_s_kamlet@att.com, blaine@fnma.com, barrett@asgard.cs.colorado.edu
	rlcarr@animato.pn.com

The US Treasury Department periodically borrows money and issues 
IOUs in the form of bills, notes, or bonds ("Treasuries").  The
differences are in their maturities and denominations:

                       Bill            Note              Bond
                +----------------+----------------+------------------
  Maturity      |  up to 1 year  |  1 - 10 years  |  10 - 30/40 years
  Denomination  |      $1,000    |    $1,000      |     $1,000
  Minimum       |     $10,000    |      "         |       "

Treasuries are auctioned.  Short term T-bills are auctioned every
Monday, and longer term bills, notes, and bonds are auctioned at other
intervals.  To find out the results of the latest auction, dial the
Kansas City Federal Reserve information line at (800) 333-2919 using a
touch-tone phone.  Press "1", then "4", then "1".  (You don't have to
wait for the recordings to complete before entering each digit.)  This
recording will tell you the purchase price, auction date, issue date,
series number, coupon rate and effective annualized yield for each of
the most recent treasury auctions.

T-Notes and Bonds pay a stated interest rate semi-annually, and are
redeemed at face value at maturity.  Exception: Some 30 year and
longer bonds may be called (redeemed) at 25 years.

T-bills work a bit differently.  They are sold on a "discounted
basis."  This means you pay, say, $9,700 for a 1-year T-bill.  At
maturity the Treasury will pay you (via electronic transfer to your
designated bank checking account) $10,000.  The $300 discount is the
"interest."  In this example, you receive a return of $300 on a $9,700
investment, which is a simple rate of slightly more than 3%.  

Treasuries can be bought through a bank or broker, but you will
usually have to pay a fee or commission to do this.  They can also
be bought with no fee using the Treasury Direct program, which is
described elsewhere in the FAQ.

In practice, the first T-bill purchase requires you to send a
certified or cashiers check for the full face value, and within a 
week or so, after the auction sets the interest rate, the Treasury
will return the discount ($300 in the example above) to your checking
account.  For some reason, you can purchase notes and bonds with a
personal check.  

Treasuries are negotiable.  If you own Treasuries you can sell them
at any time and there is a ready market.  The sale price depends on
market interest rates.  Since they are fully negotiable, you may also
pledge them as collateral for loans.

Treasury bills, notes, and bonds are the standard for safety.  By
definition, everything is relative to Treasuries; there is no safer
investment in the U.S.  They are backed by the "Full Faith and Credit"
of the United States. 

Interest on Treasuries is taxable by the Federal Government in the
year paid.  States and local municipalities do not tax Treasury
interest income.  T-bill interest is recognized at maturity, so they
offer a way to move income from one year to the next. 

The US Treasury also issues Zero Coupon Bonds.  The ``Separate Trading
of Registered Interest and Principal of Securities'' (a.k.a. STRIPS)
program was introduced in February 1986.  All new T-Bonds and T-notes
with maturities greater than 10 years are eligible.  As of 1987, the
securities clear through the Federal Reserve's books entry system.
As of December 1988, 65% of the ZERO-COUPON Treasury market consisted
of those created under the STRIPS program.

However, the US Treasury did not always issue Zero Coupon Bonds.
Between 1982 and 1986, a number of enterprising companies and funds
purchased Treasuries, stripped off the ``coupon'' (an anachronism from
the days when new bonds had coupons attached to them) and sold the
coupons for income and the non-coupon portion (TIGeRs or Strips) as
zeroes.  Merrill Lynch was the first when it introduced TIGR's and
Solomon introduced the CATS.  Once the US Treasury started its program,
the origination of trademarks and generics ended. There are still TIGRs
out there, but no new ones are being issued.

Other US Debt obligations that may be worth considering are US Savings
Bonds (Series E/EE and H/HH) and bonds from various US Government
agencies, including the ones that are known by cutesy names like
Freddie Mac, as well as the Mae sisters, Fannie, Ginnie and Sallie.

Historically, Treasuries have paid higher interest rates than EE
Savings Bonds.  Savings Bonds held 5 years pay 85% of 5 year Treasuries.
However, in the past few years, the floor on savings bonds (4% under
current law) is higher than short-term Treasuries.  So for the short
term, EE Savings Bonds actually pay higher than treasuries, but are
non-negotiable and purchases are limited to $15,000 ($30,000 face)
per year.

US Government Agency Bonds, in general, pay slightly more interest
but are somewhat less predictible than Treasuries.  For example,
mortgage-backed-bond returns will vary if mortgages are redeemed
early.  Some agency bonds, technically, are not general obligations
of the United States, so may not be purchased by certain institutions
and local governments.  The "common sense" of many people, however,
is that the Congress will never allow any of those bonds to default.


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Subject: Bonds - Treasury Direct 
Last-Revised: 15 Apr 1995
From: jberlin@falcon.aamrl.wpafb.af.mil, a_s_kamlet@att.com,
	bob.johnson@friendz.cts.com, rlcarr@animato.pn.com

You can buy Treasury Instruments directly from the US Treasury.
Contact any Federal Reserve Bank (for example, New York: 33 Liberty
Street, New York NY 10045) and ask for forms to participate in the
Treasury Direct program.  The minimum for a Treasury Note (2 years and
up) is only $5K and in some instances (I believe 5 year notes) $1K.
There are no fees for accounts below $100,000; beginning in 1995,
accounts in excess of that sum will be charged a $25 annual fee. 
You may elect to have interest payments made directly to your account. 
You even may pay with a personal check, no need for a cashier's or
certified check as Treasury Bills (1 year and under) required.  In
the Treasury Direct program, you can ask that you roll over the
matured Treasury towards the purchase of a new one.

AAII Journal had an article on this a couple of years ago.  Like they
said, the government service is great, they just do not advertise it well. 
You can get more information from the following phone numbers:

    Federal Reserve Banks   Recorded Info   Voice Line
    ----------------------------------------------------
    Atlanta                 404-521-8657    404-521-8653
    Baltimore               301-576-3500    301-576-3300
    Birmingham              205-731-9702    205-731-8708
    Boston                  617-973-3805    617-973-3810
    Buffalo                 716-849-5158    716-849-5000
    Charlotte               704-358-2424    704-358-2100
    Chicago                 312-786-1110    312-322-5369
    Cincinnati                              513-721-4787
    Cleveland                               216-579-2490
    Dallas                                  214-651-6362
    Denver                  303-572-2475    303-572-2470
    Detroit                 313-963-4936    313-964-6157
    El Paso                                 915-544-4730
    Houston                                 713-659-4433
    Jacksonville            904-632-1178    904-632-1179
    Kansas City             816-881-2767    816-881-2409
    Little Rock                             501-324-8272
    Los Angeles                             213-624-7398
    Louisville              502-568-9240    502-568-9236
    Memphis                                 901-523-7171
    Miami                   305-471-6257    305-471-6497
    Minneapolis             612-340-2051    612-340-2075
    Nashville               615-251-7236    615-251-7100
    New Orleans             504-593-3290    504-593-3200
    New York                212-720-5823    212-720-6619
    Oklahoma City           405-270-8660    405-270-8652
    Omaha                   402-221-5638    402-221-5636
    Philadelphia            215-574-6580    215-574-6680
    Pittsburgh              412-261-7988    412-261-7863
    Portland                503-221-5931    503-221-5932
    Richmond                804-697-8355    804-697-8372
    Salt Lake City          801-322-7844    801-322-7900
    San Antonio             210-978-1330    210-978-1303
    San Francisco           415-974-3491    415-974-2330
    Seattle                 206-343-3615    206-343-3605
    Saint Louis             314-444-8602    314-444-8665

    US Treasury                             202-874-4000
    Device for Hearing Impaired:            202-874-4026


-----------------------------------------------------------------------------

Subject: Bonds - US Savings from US Treasury
Last-Revised: 17 May 1995
From: a_s_kamlet@att.com, hamachi@adobe.com, rlcarr@animato.network23.com,
	mpersina@postciss.daytonoh.ncr.com, David.Capshaw@sematech.org,
	paulmaf@eskimo.com, JZinchuk@draper.com

Series EE Savings bonds are obligations of the US government and
are exempt from state and local income taxes.  Purchase limits as well
as current and historical interest rates are discussed below.  Many
employers have an employee bond purchase/payroll deduction plan, and
most commercial banks act as agents for the Treasury and will let you
fill out the purchase forms and forward them to the Treasury.  You
will receive the bonds in the mail a few weeks later.  Savings Bonds
are not negotiable instruments, and cannot be transferred to anyone at
will.  They can be transferred in limited circumstances, and there
could be tax consequences at the time of transfer.  

Series EE bonds are purchased at half their face value or denomination.  
So you would purchase a $100 bond for $50.  You can buy up to $15,000
per year (your cost; actually $30,000 face value) in US Savings Bonds.
Because savings bonds earn market-based rates that change every 6
months, there is no way to predict when a bond will reach its face
value.  For example, a bond earning an average of 5% would reach face
value in 14 1/2 years while a bond earning an average of 6% would
reach face value in 12 years.  

Bonds can be cashed anytime after 6 months.  Bonds absolutely should
be cashed before their final maturity dates for the following reasons.
Firstly, if you fail to cash the bond (or roll it over into an HH)
before the critical date, you will be losing money because the bond 
will no longer be earning interest.  Secondly, under IRS regulations,
tax is due on the interest in the year the bond is cashed or it
reaches final maturity.  If you hold the bond beyond 12/31 of the
final-maturity year, then when you finally get around to cashing it,
you will not only owe the tax on the earnings, but interest and
penalties besides.  Thirdly, once the bond passes its final maturity
date (as for example a year later) you cannot roll the proceeds into
an HH to further postpone tax on the accumulated interest.

Begin text for Series EE Savings bonds issued on or after 1 May 95 ->

These bonds will earn market-based rates from purchase through
original maturity.  They will earn the short-term rate for the first
five years after purchase and will earn the long-term rate from the
fifth through the seventeenth year.  The bonds will continue to earn
interest after 17 years for a total of 30 years at the rates then in
effect for extensions.  If the market-based rates are not sufficient
for a bond to reach face value in 17 years, the Treasury will make a
one-time adjustment to increase it to face value at that time.
Therefore, you are guaranteed that a bond will be worth its face value
as of 17 years of its purchase date.  This equates to a minimum
interest rate of 4.1%.  If the market-based rates are higher than
this, the bond will be worth more than its face value after 17 years.

The short-term rate is 85% of the average of six-month Treasury
security yields.  A new rate is announced and becomes effective each
May 1 and November 1.  The May 1 rate reflects market yields during
the preceding February, March, and April.  The November 1 rate
reflects market yields during the preceding August, September, and
October. 

The long-term rate is 85% of the average of five-year Treasury
security yields.  A new rate is announced and becomes effective each
May 1 and November 1.  The May 1 rate reflects market yields during
the preceding  November through April and the November 1 rate reflects
market yields during the preceding May through October. 

Effective 1 May 1995:
 The short-term rate is 5.25%
 The long-term rate is  6.31%

Interest will be added to the value of the bonds every six months.
Bonds will increase in value six months after purchase and every six
months thereafter.  For example, a bond purchased in June will
increase in value on December 1 and on each following June 1 and
December 1.  When investors cash their bonds they will receive the
value of the bond as of the last date interest was added.  If an
investor redeems a savings bond between scheduled interest dates the
investor will not receive interest for the partial period. 

<- End of text for Series EE Savings bonds issued on or after 1 May 95.

Outstanding Series E Bonds and Savings Notes as well as Series EE
Bonds issued before 1 May 1995 are not affected by the above, newly
defined, rules.  They will continue to earn interest under the terms
of the offering in effect before 1 May 1995 even as they enter
extension periods.

We've tried to capture relevant information about bonds issued in the
past in a table, but the footnotes to the table, which muddle the
issue considerably, are also important!  Before presenting the table,
you need to understand some terminology and reasons for the table's
columns:  

 + Issue date: The first day of the month of purchase.  

 + Nominal original maturity (date):  The date at which a bond reaches
   its face value.  The applicable rates need only exceed the
   guaranteed rate (see below) by a small amount for the actual
   original maturity date to occur earlier than the nominal first date. 

   For bonds issued prior to 1 May 1995, the actual first maturity
   date actually depends on the minimum guaranteed rate of interest
   that prevails during its life!   This period (date) ranges from 9
   yrs 8 months for bonds issued prior to 11/86 to  18 years for those
   issued since the guaranteed rate was lowered to 4% in 1994.  For
   bonds purchased prior to 1 Dec 1985, the nominal original maturity
   date will be the stated interest rate on the bond divided into
   72. Over the years that date varied from 9 yrs. 6 months to 12
   years. that means  minimum guaranteed rates of 6 to 7.5%, except 
   for the oldest E bonds whose rates (for those still not having
   reached final maturity) can be as low as 4%.

 + Final maturity (date): the date following which the bond no longer
   earns any interest (see discussion above about cashing bonds before
   this date).

 + Guaranteed minimum rate during original maturity: the minimum
   interest rate that the US treasury will pay you on the bonds, no
   matter what the market rate may be.  This can either be stated as
   an interest rate (from which the nominal original maturity date can
   be calculated) or as a nominal original maturity date (from which
   the minimum guaranteed rate can be calculated).

 + Crediting of interest: Prior to 1 May 1995, interest was calculated
   to the first day of the month you cash it in (up to 30 months, and
   to the previous 6 month interval after).  Bonds issued after 1 May
   1995 and all earlier bonds entering any extended maturity period
   after 1 May 1995 will only earn interest from that point on every
   six months.  For bonds issued after 1 May 1995 or for earlier bonds
   entering any extended maturity period after that date, you cash
   them as soon as possible after any 6 month anniversary date,
   because cashing a bond any time between any two 6th month
   anniversary dates loses all interest since the last 6 month
   anniversary date.

And now the table:

             |  Nom. orig. |  Final     |  Guar min rate   |  Interest
 Issue date  |  maturity   |  maturity  |  orig. maturity  |  credited
-------------+-------------+------------+------------------+-------------
<   Nov 1965 |    ? yrs    |   40 yrs   |      ?.?%        |  monthly
             |             |            |                  |
-------------+-------------+------------+------------------+-------------
  1 Nov 1982 | 9 yrs 7 mos |   30 yrs   |      7.5%        |  monthly
 31 Oct 1986 |             |            |                  |
-------------+-------------+------------+------------------+-------------
  1 Nov 1986 |    12 yrs   |   30 yrs   |      6.0%        |  monthly
 28 Feb 1993 |             |            |                  |
-------------+-------------+------------+------------------+-------------
  1 Mar 1993 |    18 yrs   |   30 yrs   |      4.0%        |  monthly
 30 Apr 1995 |             |            |                  |
-------------+-------------+------------+------------------+-------------
  1 May 1995 |    17 yrs   |   30 yrs   |      4.1%        |  biannually
             |             |            |                  |
-------------+-------------+------------+------------------+-------------

  + Bonds issued between 1 November 1982 and 31 October 1986 have a
    minimum rate of 7.5% through their maturity period of 9 yrs 7 mos.
    If these bonds entered a period of extended maturity prior to
    March 1993, they would earn the prevailing market based rates, or
    a minimum of the 6.0% guaranteed rate until the next extended
    maturity period begins.   If these bonds enter a period of
    extended maturity after March 1993, they will earn the prevailing
    market based rates, or at least the minimum 4.0% guaranteed rate
    for the remainder of their life.  

  + Bonds issued between 1 November 1986 and 28 February 1993 are
    subject to the same rules discussed earlier; i.e., they earn
    the 6% guaranteed rate until they reach face value (which may be
    before their 12th anniversary depending on prevailing rates),
    after which they will earn the prevailing market based rates, or
    at least the minimum 4.0% guaranteed rate for the remainder of
    their life.  

  + Bonds issued between 1 March 1993 and 30 April 1995 and held at
    least 5 years have a minimum rate of 4%, and this rate is
    guaranteed through their original maturity of 18 years.  These
    EE bonds will earn a flat 4% through the first 5 years rather
    than the short-term rate, and the interest will accrue monthly
    through the life of the bond after the initial six months, rather
    than semiannually after 30 months.  Any bond issued before 1 May
    1995 will earn a minimum of 4% after it enters its next extended
    maturity period.   

  + For bonds issued after 1 May 1995, interest is calculated and
    credited to the value of the bond *only once every six months*.

Series E bonds were issued before 1980, and are very similar to EE
bonds except they were purchased at 75% of face value.  Everything
else stated here about EE bonds applies also to E bonds.

Interest on an EE/E bond can be deferred until the bond is cashed
in, or if you prefer, can be declared on your federal tax return as
earned each year.  When you cash the bond you will be issued a Form
1099-INT and would normally declare as interest all funds received
over what you paid for the bond (and have not yet declared).  However,
you can choose to defer declaring the interest on the EE bonds and
instead use the proceeds from cashing in an EE bond to purchase an
HH Savings bond (prior to 1980, H Bonds).  You can purchase HH Bonds
in multiples of $500 from the proceeds of EE bonds.  HH Bonds pay
interest every 6 months and you will receive a check from the Treasury.
When the HH bond matures, you will receive the principal, and a form
1099-INT for that deferred EE interest.

Using Savings Bonds for College Tuition:  EE bonds purchased in your
name after December 31, 1989 can be used to pay for college tuition
for your children or for you, and the interest may not be taxable. 
They have to have been issued while you were at least 24 years old. 
There are income limits:  To use the full interest benefit your
adjusted gross income must be less than  (for 1992 income) $44,150
single, and 66,200 married, and phases out entirely at $59,150 single
and $96,200 married.  Use Form 8815 to exclude interest for college
tuition.  (This exclusion is not available for taxpayers who file as
Married Filing Separately.)

If your Savings Bonds are lost, stolen, mutilated, or destroyed, give
prompt notice of the facts to the Department of the Treasury, Bureau
of the Public Dept, Parkersburg, WV 26106-1328, and a list, if
possible, of the serial numbers (with prefix and suffix letters), the 
issue dates (month and year) and the denominations of the Bonds.  Show
all names and addressed that could have appeared on the Bonds, along
with the owner's Social Security number, and whether the Bond numbers
and issue dates are known.  The more information that you are able to
provide, the quicker the Treasury will be able to replace your Bonds.

For current rates, you may call 1-800-4US-Bonds (1-800-487-2663)
within the US.  You can call any Federal Reserve Bank to request
redemption tables for US Savings Bonds.  You may also request the
tables from The Bureau of Public Debt, Bonds Div., Parkersburg, WV
26106-1328.  Information is also available online from the Univ. of
Michigan's Gopher server, use this URL:
   <gopher://una.hh.lib.umich.edu/11/ebb/monetary>  

For those who want to automate the process, the US Treasury publishes a
program called CRV (Current Redemption Values) that can generate reports
on the redemption value of US EE (Savings) Bonds.  It is a DOS program,
size 270Kb, and is available by accessing this URL:
	<ftp://host una.hh.lib.umich.edu/ebb/bin/crvinfo.exe>
This program is updated when the rates for savings bonds are changed.

[ Compiler's note:  These disgustingly complex regulations come from
  many of the same people who developed the US Tax Code.  See any
  similarities??  Sheesh! ] 


-----------------------------------------------------------------------------

Subject: Bonds - Value of U.S. Treasury Bills
Last-Revised: 24 Oct 1994
From: barrett@asgard.cs.colorado.edu

1. How do I find out the current value of my U.S. Treasury Bill?

Look in the Wall Street Journal in the issue dated the next business
day after the valuation date you want.  Look in the "Money and
Investing" section for the headline "Treasury Bonds, Notes, & Bills",
then look for the column titled "TREASURY BILLS".  Scan down the
column for the maturity date of your bill.  Then examine the "Bid" and
"Days to Mat." values.  The necessary formula:

Current value = (1 - ("Bid" / 100 * "Days to Mat." / 360)) * Mature Value

For example, a 13-week treasury bill purchased at the auction on
Monday June 21 appears in the June 22, 1994 WSJ in boldface as
maturing on September 22, 1994 with an "Asked" of 4.18 and 91 "Days to
Mat.".  Its selling price on Wedesday August 31, 1994 appeared in the
September 1, 1994 Wall Street Journal as 20 "Days to Mat." with 4.53
"Bid".  A $10,000 bill would sell for: (1 - 4.53/100 * 20/360) *
$10,000 = $ 9,974.83 minus any brokerage fee.


2. How is the "coupon yield" computed for a U.S. Treasury Bill?

The coupon yield is listed as "Ask Yld." in the Wall Street Journal
under "Treasury Bonds, Notes and Bills".  The value is computed using
the formula:  
 
   couponYield = 365 / (360/discount - daysToMaturity/100)

Discount is listed under the "Asked" column, and ""couponYield" is shown
under the "Ask Yld." column.  For example, the October 21, 1994 WSJ lists
Jan 19, '95 bills as having 87 "Days to Mat.", and an "Asked" discount as
4.98. This gives: 365 / (360/4.98 - 87/100) = 5.11% which is shown under
the "Ask Yld." column for the same issue.  DaysToMaturity for 13-week,
26-week and 52-week bills will be 91, 182 and 384 respectively on the day
the bill is issued.


-----------------------------------------------------------------------------

Subject: Bonds - Zero-Coupon
Last-Revised: 28 Feb 1994
From: a_s_kamlet@att.com

Not too many years ago every bond had coupons attached to it.  Every
so often, usually every 6 months, bond owners would take a scissors
to the bond, clip out the coupon, and present the coupon to the bond
issuer or to a bank for payment.  Those were "bearer bonds" meaning
the bearer (the person who had physical possession of the bond) owned
it.  Today, many bonds are issued as "registered" which means even if
you don't get to touch the actual bond at all, it will be registered
in your name and interest will be mailed to you every 6 months. It is
not too common to see such coupons. Registered bonds will not generally
have coupons, but may still pay interest each year.  It's sort of like
the issuer is clipping the coupons for you and mailing you a check. 
But if they pay interest periodically, they are still called Coupon
Bonds, just as if the coupons were attached.

When the bond matures, the issuer redeems the bond and pays you the
face amount.   You may have paid $1000 for the bond 20 years ago and
you have received interest every 6 months for the last 20 years, and
you now redeem the matured bond for $1000.

A Zero-coupon bond has no coupons and there is no interest paid.

But at maturity, the issuer promises to redeem the bond at face value.  
Obviously, the original cost of a $1000 bond is much less than $1000. 
The actual price depends on: a) the holding period -- the number of
years to maturity, b) the prevailing interest rates, and c) the risk
involved (with the bond issuer).

Taxes:  Even though the bond holder does not receive any interest while
holding zeroes, in the US the IRS requires that you "impute" an annual
interest income and report this income each year.  Usually, the issuer
will send you a Form 1099-OID (Original Issue Discount) which lists the
imputed interest and which should be reported like any other interest
you receive.  There is also an IRS publication covering imputed interest
on Original Issue Discount instruments.

For capital gains purposes, the imputed interest you earned between the
time you acquired and the time you sold or redeemed the bond is added to
your cost basis.  If you held the bond continually from the time it was
issued until it matured, you will generally not have any gain or loss.

Zeroes tend to be more susceptible to prevailing interest rates, and
some people buy zeroes hoping to get capital gains when interest rates
drop. There is high leverage.   If rates go up, they can always hold them.

Zeroes sometimes pay a better rate than coupon bonds (whether registered
or not).  When a zero is bought for a tax deferred account, such as an
IRA, the imputed interest does not have to be reported as income, so
the paperwork is lessened.

Both corporate and municipalities issue zeroes, and imputed interest on
municipals is tax-free in the same way coupon interest on municipals is. 
(The zero could be subject to AMT).

Some marketeers have created their own zeroes, starting with coupon
bonds, by clipping all the coupons and selling the bond less the coupons
as one product -- very much like a zero -- and the coupons as another
product. Even US Treasuries can be split into two products to form a
zero US Treasury.

There are other products which are combinations of zeroes and regular
bonds.  For example, a bond may be a zero for the first five years of
its life, and pay a stated interest rate thereafter.  It will be treated
as an OID instrument while it pays no interest.

(Note:  The "no interest" must be part of the original offering; if a
cumulative instrument intends to pay interest but defaults, that does not
make this a zero and does not cause imputed interest to be calculated.)

Like other bonds, some zeroes might be callable by the issuer (they are
redeemed) prior to maturity, at a stated price.


-----------------------------------------------------------------------------

Subject: Exchanges - Circuit Breakers on NYSE
Last-Revised: 1 Apr 1994
From: chedley@carthago.intel.com, okuyama@netcom.com,
	mike@enterprise.East.Sun.COM

Because program trading has been blamed for the fast crash of 1987, 
circuit breakers were put in place in 1989 to cut off the big boy's
computer connections whenever the market moves up or down by more
than a large number of points in a trading day.  The idea is that
this will limit the daily damage.  These are the provisions:

Trigger			Action
-------			------
DJIA +/- 50		Program trading curbs in effect; a key computer
			is turned off, so program trading must be done
			"by hand".  Curbs are removed when the DJIA
			retraces it's gain/loss to the +/- 25 level.

S&P 500 futures +/- 12	"Side car" rule (suspends trading of S&P 500
			futures contract for one half hour); this
			effectively stops program trading.

DJIA +/- 250		NYSE halts trading for one hour.

DJIA +/- 350		NYSE halts trading for the rest of the day.

The circuit breakers cut off the automated program trading initiated
by the big brokerage houses.  The big boys have their computers directly
connected to the trading floor on the stock exchanges, and hence can
program their computers to place direct huge buy/sell orders that are
executed in a blink.  This automated connection allows them to short-cut
the individual investors who must go thru the brokers and the specialists
on the stock exchange.

Statistical evidence suggests that about 2/3 of the Mar-Apr 1994 down
slide is caused by the program traders trying to lock in their profits
before all hell breaks loose.  The volume of their trades and their
very action may have accelerated the slide.  The new game in town is
how to outfox the circuit breakers and buy or sell quickly before the
50-point move triggers the halting of the automated trading and shuts
off the computer.


-----------------------------------------------------------------------------

Subject: Exchanges - Instinet 
Last-Revised: 11 May 1994 
From: jwben@delphi.com,

Instinet is a professional stock trading system which is owned by
Reuters.  Institutions use the system to trade large blocks of shares
with each other without using the exchanges.  Commissions are slightly
negotiable but generally $1 per hundred shares.  Instinet also runs a
crossing network of the NYSE last sale at 6pm.  A "cross" is a trade
in which a buyer and seller interact directly with no assistance of a 
market maker or specialist.  These buyer-seller pairs are commonly
matched up by a computer system such as Instinet.


-----------------------------------------------------------------------------

Subject: Exchanges - Market Makers and Specialists
Last-Revised: 28 Jan 1994
From: jeffwben@aol.com

Both Market Makers (MMs) and Specialists (specs) make market in stocks. 
MMs are part of the National Association of Securities Dealers market
(NASD), sometimes called Over The Counter (OTC), and specs work on the
New York Stock Exchange (NYSE).  These people serve a similar function
but MMs and specs have a number of differences.  NASDAQ stands for the
National Association of Securities Dealers Automated Quotation system.

NASDAQ is a dealer system.  A firm can become a market maker (MM) on
NASDAQ by applying.  The requirements are relatively small, including
certain capital requirements, electronic interfaces, and a willingness
to make a two-sided market.  You must be there every day.  If you don't
post continuous bids and offers every day you can be penalized and not
allowed to make a market for a month.  The best way to become a MM is
to go to work for a firm that is a MM.  MMs are regulated by the NASD
which is overseen by the SEC.

The NYSE uses an agency auction market system which is designed to
allow the public to meet the public as much as possible.  The majority
of volume (approx 88%) occurs with no intervention from the dealer.
The responsibility of a spec is to make a fair and orderly market in
the issues assigned to them.  They must yield to public orders which
means they may not trade for their own account when there are public
bids and offers.  The spec has an affirmative obligation to eliminate
imbalances of supply and demand when they occur.  The exchange has
strict guidelines for trading depth  and continuity that must be
observed.  Specs are subject to fines and censures if they fail to
perform this function.  

There are 1366 NYSE members.  Approximately 450 are specialists
working for 38 specialists firms.  As of 11/93 there are 2283 common
and 597 preferred stocks listed on the NYSE.  Each individual spec
handles approximately 6 issues.  The very big stocks will have a spec
devoted solely to them.  NYSE specs have large capital requirements
and are overseen by Market Surveillance at the NYSE.   

Every listed stock has one firm assigned to it on the floor.  Most
stocks are also listed on regional exchanges in LA, SF, Chi., Phil.,
and Bos.  All NYSE trading (approx 80% of total volume) will occur at
that post on the floor of the specialist assigned to it.  To become a
NYSE spec the normal route is to go to work for a specialist firm as a
clerk and eventually to become a broker. 

In the OTC public almost always meets dealer which means it is nearly
impossible to buy on the bid or sell on the ask.  The dealers can buy
on the bid even though the public is bidding.  Both spec and MM are
required to make a continuous market but in the case of MM's their is
no one firm who has to take the responsibility if trading is not fair
or orderly.  During the crash the NYSE performed much better than
NASDAQ.  This was in spite of the fact that some stocks have 30+ MMs.
Many OTC firms simply stopped making markets or answering phones until
the dust settled. 

As you can see there are a similarities and differences.  Most academic
literature shows NYSE stocks trade better (in tighter ranges, less
volatility, less difference in price between trades).  On the NYSE 93%
of trades occur at no change or 1/8 of a point difference. 

It is counterintuitive that one spec could make a better market than
20 MMs.  The spec operates under an entirely different system.  This
system requires exposure of public orders to the auction and the
opportunity for price improvement and to trade ahead of the dealer.
The system on  the NYSE is very different than NASDAQ and has been
shown to create a better market for the stocks listed there.  This is
why 90% of US stocks that are eligible for NYSE listing have listed.


-----------------------------------------------------------------------------

Subject: Exchanges - Phone Numbers
Last-Revised: 13 Aug 1993
From: asuncion@ac.dal.ca

If you wish to know the telephone number for a specific company that is
listed on a stock exchange, call the exchange and request to be connected
with their "listings" or "research" department.

AMEX    +1 212 306-1000
ASE     +1 403 974-7400
MSE     +1 514 871-2424
NASDAQ  +1 202 728-8333/8039
NYSE    +1 212 656-3000
TSE     +1 416 947-4700
VSE     +1 604 689-3334/643-6500


-----------------------------------------------------------------------------

Subject: Exchanges - Ticker Tape Terminology
Last-Revised: 21 Aug 1995
From: capskb@alliant.backbone.uoknor.edu, nfs@cs.princeton.edu,
      75672.1613@compuserve.com

Ticker tape says:	    Translation (but see below):
        NIKE68 1/2            100 shares sold at 68 1/2
     10sNIKE68 1/2           1000 shares sold at   "
 10.000sNIKE68 1/2          10000 shares sold at   "

The extra zeroes for the big trades are to make them stand out.  All
trades on CNN and CNBC are delayed by 15 minutes.  CNBC once advertised
a "ticker guide pamphlet, free for the asking", back when they merged
with FNN.  It also has explanations for the futures they show.

However, the first translation is not necessarily correct.  CNBC has
a dynamic maximum size for transactions that are displayed this way. 
Depending on how busy things are at any particular time, the maximum
varies from 100 to 5000 shares.  You can figure out the current maximum
by watching carefully for about five minutes.  If the smallest number
of shares you see in the second format is "10s" for any traded security,
then the first form can mean anything from 100 to 900 shares.  If the
smallest you see is "50s" (which is pretty common), the first form
means anything between 100 and 4900 shares.

Note that at busy times, a broker's ticker drops the volume figure and
then everything but the last dollar digit (e.g. on a busy day, a trade
of 25,000 IBM at 68 3/4 shows only as "IBM 8 3/4" on a broker's ticker). 
That never happens on CNBC, so I don't know how they can keep up with all
trades without "forgetting" a few.

NASDAQ uses a "fifth letter" identifier in its ticker symbols.  Four
letter symbols, and five letter symbols in instances of multiple
issues listed by the same company, are listed in newspapers and
carried on the ticker screen by CNBC and CNN.  These symbols are
required to retrieve quotes from quote servers.  

Here's the complete list with brief descriptions:
	A - Class A
	B - Class B
	C - exempt from NASDAQ listing qualifications for limited
	    period
	D - new issue
	E - delinquent in required SEC filings
	F - foreign
	G - First  convertible bond
	H - Second convertible bond (same company)
	I - Third  convertible bond (same company)
	J - Voting
	K - Nonvoting
	L - misc situations, including second class units, third class
	    warrants, or sixth class preferred stock
	M - Fourth class preferred (same company)
	N - Third  class preferred (same company)
	O - Second class preferred (same company)
	P - First  class preferred (same company)
	Q - in bankruptcy proceedings
	R - Rights
	S - Shares of beneficial interest
	T - with warrants or rights
	U - Units
	V - When issued and when distributed
	W - Warrants
	X - mutual fund
	Y - American Depositary Receipts
	Z - misc situations, including second class of warrants, fifth
	    class preferred stock or any unit, receipt or certificate 
	    representing a limited partnership interest.


-----------------------------------------------------------------------------

Subject: Information Sources - Books
Last-Revised: 29 Jul 1994
From: jhc@iris.uucp, nfs@princeton.edu, ajayshah@rcf.usc.edu,
	rbeville@tekig5.pen.tek.com, Chris.Hynes@launchpad.unc.edu,
	orwant@home.media.mit.edu

Books are organized alphabetically by author's last name.

Author			Title(s)
-----			--------
Peter Bernstein		Capital Ideas 
Frank Cappielo		New Guide to Finding the Next Superstock
George S. Clason	The Richest Man in Babylon
Consumer's Union	Consumer Reports Money Book
Burton Crane		The Sophicated Investor
William Donoghue	No-Load Mutual Fund Guide
Dun & Bradstreet	Guide to Your Investments 1993
Louis Engel		How to Buy Stocks
Norman G. Fosback	Stock Market Logic
Gary Gastineau		The Stock Options Manual
Benjamin Graham		The Intelligent Investor, Security Analysis
C. Colburn Hardy	The Fact$ of Life
Jiler			How Charts Can Help You 
Gerald M. Loeb		The Battle for Investment Survival
Peter Lynch		One Up on Wall Street
Burton Malkiel		A Random Walk Down Wall Street 
Lawrence McMillan	Options as a Strategic Investment
Sylvia Porter		New Money Book for the 80s
Pring			Technical Analysis Explained
Claude Rosenberg	Stock Market Primer
L. Louis Rukeyser	How to Make Money in the Stock Market
Terry Savage		New Money Strategies for the 1990's
Charles Schwab		How to be Your Own Stockbroker
J. Siegel		Stocks for the Long Run
John A. Straley		What About Mutual Funds
Andrew Tobias		[Still] Only [Other] Investment Guide You'll Ever Need
				(3 books, very similar titles)
John Train		Money Masters, New Money Masters
Venita Van Caspel	Money Dynamics for the 1990s
Richard Wurman et al.	Wall Strt Jrnl Guide to Understanding Money & Markets
Martin Zweig		Winning on Wall Street


-----------------------------------------------------------------------------

Subject: Information Sources - Dialup and Subscription Services
Last-Revised: 1 Aug 1996
From: bakken@cs.arizona.edu, nfs@princeton.edu, gary@intrepid.com,
	discar@nosc.mil, irving@Happy-Man.com, ddavis@gain.com, 
	krshah@us.oracle.com, cr@farpoint.tucson.az.us, skrenta@usl.com,
	zheng@emei.cs.umt.edu, peize@rpi.edu, system.operator@stoicbbs.com,
	bob.johnson@friendz.cts.com, southpaw@halcyon.com,
	72066.3043@compuserve.com, afraser@hookup.net, mccrate@ix.netcom.com,
	Nick@netwiz.demon.co.uk

The following organzations, primarily commercial enterprises, offer
historical price data, current equity quotes, newsletters, and other
information for a fee.  Access is primarily via phone lines and a
modem.  Also included here are BBS's run by the US Government.

    + Dow Jones News Retrieval.  Stock, bond, mutual, index quotes as well
      as news articles on companies, and misc. analysis packages. Available
      via dialup over Tymnet and SprintNet; available via Internet.  Their
      after-hours service (8pm-5am local time) costs US$30 per month for
      the first 8 hours, $0.001 per second ($3.60/hour :-) after that. 
      Contact them at 800-522-3567 or +1 (609) 452-1511.

    + Prodigy.  US$15/month for basic service includes 15 minute delayed
      quotes on stocks at NO additional charge.  Additional US$15/month for 
      historical data download service (flat fee).  Available via local
      dial-up all over the US.  Contact them at 800-PRO-DIGY.

    + Compuserve.  US$8.95/month for basic service includes 15-min delayed
      quotes on stocks and options and access to (mutual) Fund Watch Online.
      Historical quotes are available for about US$.05 each.  Available via
      local dial-up all over the US. 
      Contact them at 800-848-8990 or +1 (614) 457-8650.

    + GEnie.  US$8.95/month includes 4 free hours; subsequent hours are $3.
      Has daily closing quotes. Genie Professional service (price not given)
      gives historical quotes, stock reports, different investment s/w, access
      to Charles Schwab and online trading.  Contact them at 800-638-9636.

    + America Online.  US$9.95/month includes 5 free hours, 15-minute-delayed
      quotes, and the ability to track a portfolio of stocks and mutual funds.  
      Contact them at 800-827-6364.

    + ClarkNet sells Internet shell accounts for $19/month unlimited time 
      to telephone subscribers in the No. VA/DC/MD/Baltimore areas.  Thanks
      to a site license for QuoteCom, subscribers have free access to that
      service.  Contact them at 410-254-3900.

    + Farpoint. ($4 or $8/week for an IBM-compatible diskette) provides
      daily high, low, close, and volume for for approximately 6000 stocks. 
      They offer historical data from 1 July 89 to present.  Write to
      Farpoint, 3412 Milwaukee Avenue, Suite 477, Northbrook, Illinois 60062.
      Also see the listing for the Farpoint BBS below.

    + inGenius.  Broadcasts stock quotes and news via cable TV in the US.
      Decoder costs $150 and provides 9600-baud serial-line output. Tier 1
      service is $60/year and includes quotes 3x/day and news stories. 
      Tier 2 service costs $22/month and adds 15-min delayed quotes and
      investment blurbs.  Ftp a UNIX Xpress-reader from this URL:
      <ftp://ftp.acns.nwu.edu/pub/xpress>.  Beware that your local cable
      rep. may not know that the cable co. offers it!  Contact inGenius
      at 800-7PC-NEWS.

    + Worden Brothers TeleChart 2000.  PC software costs $29.  Historical
      data costs 1/2-cent/day for minimum 300 days, 1/4-cent thereafter,
      and includes high, low, close, and volume.  Offers data from about 1988
      for every listed and OTC issue and many indexes.  Toll-free number for
      downloading data at 14.4K baud.  Contact them at 800-776-4940.

    + InterTrade provides historical quotes for stocks, funds, and indices
      on all three major US markets on floppy disks.  One year of data for
      a block of 500 stocks/funds/indices costs $20.  Subscriptions available.
      For more information, contact them at +1 (408) 453-3413, send email to
      72066.3043@compuserve.com or access this URL:
      <ftp://sunsite.unc.edu/pub/archive/misc.invest/InterTrade>

    + Knight Ridder Financial/Europe offers a database of historical and
      end-of-day information which would be of interest to those who follow
      the world markets; all info obtained via dial-up.  Access the URL
      <http://www.route-one.co.uk/route-one/ridder> to learn more.

    + Exchange Market Systems of Montreal, Canada covers all Canadian exchgs
      and most American ones; they offer access via Datapac, realtime data,
      15-minute delayed data (about 1 cent per quote), and five years of
      historical data.  Contact them at +1 (514) 982-6687.  

    + The American Association of Individual Investors (AAII) sells a package
      on floppy disk issued quarterly with financial info (balance sheets,
      company summary, stock summary, income statement data) on many issues.
      Only $99/year if you are a member. Contact them at +1 (312) 280-0170.

    + Standard & Poor's Compustat (most complete and most expensive).
      Contact them at ............

    + Disclosure's "Compact Disclosure" on CD (only $6,000 a year).
      Contact them at ............

    + Value Line's Database 
      Contact them at ............

Bulletin Boards for historical stock information include:
    + The Farpoint BBS offers a free source of historical stock data
      (about 3 years worth).  They give you 120 minutes of free time
      daily and have historical data files on hundreds of stocks.
      Phone number is +1 (312) 274-6128.

    + The Business Center BBS in San Diego carries historical data on
      most issues on the NYSE, NASDAQ, and AMEX.   TBC also provides free
      15-minute delayed quotes on over 12,000 symbols, mutual funds, and
      indexes.  It is free but limits on-line time to 20 minutes.
      Phone number is +1 (619) 482-8675.

    + Stock Data.  $10/month for daily market data via modem, $30-$45
      per month for weekly update via diskette.  Historical data back to
      1987 at $1/day.  Phone number is +1 (410) 280-5533.

Government-run bulletin boards include:
    + Bureau of the Census, +1 (301) 763-1568

    + Bureau of Economic Analysis, +1 (301) 763-7554
      Business and industry information; economic analysis;
      agricultural reports.

    + Energy Information Administration, +1 (202) 586 2557
      Petroleum production, reserve and consumption reports.
 
    + Department of Commerce, +1 (202) 377-0433
      Economic Bulletin Board, +1 (202) 377-3870
      Latest economic reports.

    + Department of Labor, +1 (202) 523-4784
      Labor news, employment, producer prices, CPI.
 
    + Federal Reserve Bank of St. Louis, +1 (314) 621-1824
      Historical monetary and economic data.


-----------------------------------------------------------------------------

Subject: Information Sources - Free to All Who Ask
Last-Revised: 7 Nov 1995
From: bfduerr@mmm.com, NARASIS@mtomp002.allied.com

Here are some tips about obtaining cheap or free info.

1.  Local Companies:  Look in your local newspapers for information
and stories about the companies in your immediate area.  I have found
that our local papers carry some great articles about our local
companies long before the WSJ or other papers pick up on them.  The
local papers tend to report very minute details that the "big" papers
never report.  The local paper that I get covers insider buys/sells,
IPOs etc., management changes, detailed earnings reports, analyst
opinions, you name it.  

2.  Stocks on Call: A free, fax-back service with lots of stories
about companies.  The information is biased because it is paid for by
the listing companies, but it is free, so you get what you pay for.
The list has been growing very rapidly, and they company drops the
information after it has been listed for 24-72 hours, so it pays to
call often.  Some articles are only posted for one day.  It takes me
about 5 minutes to get the 10 or so articles I want. They used to
publish a list in the papers, but the list is too long to do that now.
Once you have the list then you can call and get 3 stories per call
sent directly to your fax.  It is all handled by computer (usually).
You can call back and get 3 stories per call for free.  I have gotten
some great tips here - nice, fast-growing, small companies (and
some F-500s too).  Although Stocks on Calls is automatically provided
with your number (a feature of 800 service), they state that they will
not give your number away to third parties.  Contact them at
800-578-7888.

3.  Pro-Info: A second free, fax-back service, different from Stocks
on Call (see above).  This service places information into a computer
so you can access it at any time and it is always available.  Pro-Info
has such things as Investor Packages, Latest Earnings Reports, news
releases and analysts reports.  They cover about 100 companies and the
list is growing.  The quality of the faxes is not great because
Pro-Info apparently scans the pages into the computer Contact them at
800-PRO-INFO (800-776-4636).

4.  Stock Charts: I get at least one copy of Investor's Business Daily
per week.  The Friday edition is particularly great.  IBD is available
in most areas at newsstands, bookstores, etc.  IBD is a good newspaper
for its charts.

5.  Archive Information: For historical information, I save one copy
of Barron's or WSJ or IBD each month.  If I see a company that I am
suddenly interested in then I can just open up those old editions and
get some pretty good historical data.  IBD is great for this.

6.  An Important Edition of Wall St. Journal: I think it is imperative
to get a copy of the WSJ that covers the year in review.  This edition
comes out usually on the first business day of the new year.  It
contains a lot of information about how each stock has performed
during that last year, including the % movement of the stock during
the past year.  I get two copies of this paper because I get so much
out of them (one for work, one for home).

7.  SEC on Internet: This is the place where you can obtain Securities
and Exchange files (10-Ks, 10-Qs, you name it) on companies that file
electronically with the SEC.  See the entry for information on the 
Internet, elsewhere in this FAQ.

8.  Archive list for ticker symbols and other information:  Available
by accessing this URL: 
   <ftp://sunsite.unc.edu/pub/archive/misc.invest/information/symbols>
(See the entry for information on the Internet, elsewhere in this FAQ.)

9.  Writing Letters: If you are interested in a company then by all
means get their address and write them a letter.  If you have a
non-discount broker then they can get you the company's address.
Otherwise go to virtually any library and they will be able to help
you find the addresses you are interested in.  When you write to a
company, tell them you are interested in investing in them and you
want to learn more about them.  Ask for 10Ks, annual reports, 10Qs,
quarterly summaries, analyst reports and anything else they can send
you.  Some companies will bury you with information if you just ask.
Ask them to add your name to their mailing list for future
information.  Many companies maintain active mailing lists and so the
information will keep flowing to you.  All this for only a stamp.

10.  Public Registers Annual Report Service: This is a outfit that
acts as a clearing house for mailing out annual reports on companies.
They have a huge list (several thousand) companies that they work for,
and they are a free service.  They also send out a newspaper called
the "Security Traders Handbook" and "The Public Register".  These
newspapers contains wealth of information on earnings, IPOs, insider
trades etc.  The price on the cover says $5.00, but I have received
several issues and have never received a bill (I wouldn't pay anyway).
You have to write to them to get on their mailing list.  The address
is: Bay Tact Corporation; 440 Route 198; Woodstock Valley, CT 06282.
Write them a letter and ask them what services they provide.  They
send out annual reports, but they do not carry analysts reports and
other news release type items.  Try calling them at 800 4ANNUAL.

11.  Reader Service Cards in Investor's Daily or other Places: Another
reason I like to get the Friday edition of IBD is because they usually
have a bunch of companies hyping themselves and offering information
if you send in a reader service card.  This is another great almost
freebie.  For a stamp you can usually find at least 3-5 companies that
are worth finding out about.

12. The Wall Street Journal offers an Annual Reports Service.  According
to their blurb, you can obtain the annual reports and, if available,
quarterly reports, at no charge for any companies for which the 'club'
symbol appears in the stock listings.  (The 'club' symbol is the same
as the one on a playing card.  Look at Section C "Money and Investing"
of any WSJ and you will see what I mean.)  These reports can be ordered
by calling 800-654-CLUB.  You can also fax your request, giving the
ticker symbols of the companies whose reports you want, to 800-965-5679. 
It usually takes at least a week to get the information to you. 


-----------------------------------------------------------------------------

Compilation Copyright (c) 1996 by Christopher Lott, cml@cs.umd.edu
-- 
Christopher Lott	Compiler of the FAQ for misc.invest, misc.invest.stocks
cml@cs.umd.edu		http://www.cs.umd.edu/users/cml/
