Case: A coworker of yours was discussing her investments with a broker. Your coworker was confused because she had purchased a 10% bond but the broker kept repeating that it had a 9% yield to maturity. What is Yield to Maturity?

Yield to maturity (YTM) is the yield promised by the bondholder on the assumption that the bond will be held to maturity.

YTM also assumes that all coupon and principal payments will be made and coupon payments are reinvested at the bond's promised yield at the same rate as invested.

YTM is a measurement of the return of the bond and its calculation is identical to the calculation of internal rate of return (IRR).

Applying to the situation mentioned, the coworker purchased a bond with a coupon rate of 10 percent.

The 9 percent YTM applies if she holds on to that bond until it matures while reinvesting all interest payments she received from the instrument.

The significance of YTM is that it allows comparison of bonds with different coupon rates and prices.

1) Calculator: enter n, M, PMT, PV and VL and request k

2) Trial and Error: find k such that VL = INT({PVIFAM n) + M(PVIF M n)

3) Yield approximation formula:

YTM = INT + (M- VL)/ n

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

(M + VL)/2

Where:

VL = the value of the bond

kc = the fixed coupon interest

n= the number of periods until maturity

M = the dollar principal payment at maturity

INT = periodic dollar coupon payment = kc x M

kd = discount rate on the bond

If a bond's current yield is less than its YTM, then the bond is selling at a discount.
If a bond's current yield is more than its YTM, then the bond is selling at a premium.
If a bond's current yield is equal to its YTM, then the bond is selling at par.

In the past week I have heard of two people locally getting "skimmed" at ATM machines and having their accounts cleared, So I said I would post a blog entry on the dangers of this and what you can do to make sure it doesn't happen to you.

What is ATM Skimming
ATM skimming is when someone gets the information about your card, and PIN from some means, such as a skimming tool planted on the ATM machine, and a camera located over the keypad, or simply someone standing behind your shoulder, and with this information they clone your card and they have full access to your bank account to take what they want.

What can I do to stop it?
Follow these few simple tips to make sure your hard earned cash stays where it belongs.

If the ATM looks dodgy or changed in anyway, don't use it!
Most ATM's will show a picture of what the ATM should look like on the screen before you input your PIN, Compare the picture on screen with the ATM.

Always guard your PIN
If there is someone standing too close to you, offer for them to go first, or find a different ATM, if it is just you at the ATM, Still cover your PIN with your hand, Just in case!

Always keep your eye on the ATM
Never look away from the ATM if someone is trying to talk to you, always make sure you can see the ATM while it is in your use.

If it suspicious, Walk Away
If you don't like the look of the ATM, or the person beside you is making you feel uneasy, Cancel your transaction immediately, and walk away. And just to be safe, call your bank to make sure the transaction was properly canceled.

Destroy old cards
Any old ATM cards you might have, Cut them up and bin them, These still hold information about your account, and if you don't bin them, The wrong person could get their hands on this.

Follow these simple steps to make sure your trip to the ATM doesn't end in a hole in our pocket!, And remember most important of all, Keep your PIN exactly that, YOUR Pin

In every financial crisis there are losers and there are winners. Everywhere, we hear news of people losing money - stocks, housing, unit trusts, commodities. So where are the gainers? Surely, someone will stand to sweep in the big win. How about :-

1) Short sellers who bet the share price to crash, now seeing their profit bellying
2) Intraday traders benefiting from the volatility
3) Those who gained from the 2006-2007 stock market peak and exited gracefully

There is another group that I am truly impressed with - those who provide value for money.

It is in the environment of crisis that people or companies that truly deliver value for money will stand out. Apple is one company that beat Wall Street expectations in their 4Q results. They have consistently invested in innovation and brought value to their products. As people tighten their belts, profits will go to places that can deliver more for less, stripping away the marketing fad to reveal true value. Case in point, McDonalds have successfully positioned themselves for 11% increase in profit as they gradually move towards being health conscious and providing a cheaper alternative for meals. In fact April this year, CEO Jim Skinner has switched McDonalds to using trans-fat free oil in all of their US and Canada restaurant outlets.

India, is another example benefiting from cost cutting measures of major banks as a lucrative offshore outsourcing provider. While investment banks from all over the world are cutting manpower, India is hiring.

As the cash trickles from luxurious spending to economical spending, the group of people who provide more for less will stand to benefit the most.

Who are the winners in this financial crisis? Among them are those who bring savings to your wallet.

It's no secret that the economy is struggling. Unemployment is hitting record highs and so is inflation. Manufacturers and Factories are jumping ship, looking for cheaper labor. Airlines are laying people off by the tens of thousands, and car makers are sure to be next as record lows are being seen across the board. Unemployment for the U.S. is sitting at 5.7%, 51,000 jobs lost in July alone and 463,000 since January. Pretty scary numbers from where I'm sitting.

Let's have a look at inflation. Stay with me here... A trip to the grocery costs $400-$500 as opposed to $100-$200 a few years ago. Rent averages $850 a month for a crappy apartment. Mortgages average $1100 a month for a standard 2-3 bedroom house. Gas averages $35 per week just for the transit to and from work. Guess what?! Minimum wage averages $7.50 an hour X 40 hrs per week = $1200 dollars a month minus taxes = about $930 dollars per month. Good Luck trying to support yourself on that, let alone trying to support a family. Let's say you have a decent job, and you make $15 per hour. Do The Math! Less than $1900 a month after taxes! Congratulations, you can pay your rent and buy some food. You work 40 hrs a week at $15 an hour and your still in poverty! What about utilities, car payments, insurance, credit cards, kids, dinner and a movie etc.? Now let's say you went to college... maybe you're making $30 per hour. About $3800 a month, is that enough to pay your bills, feed the kids and still afford HBO? Maybe, if you're really good with your budget... Better hope your spouse has a good job. Is this making sense to anyone, or am I missing something here?

More and more people are looking for other means of income, I mean, what choice do we have? You shouldn't have to live a miserable existence just to get by and then still have nothing after working 40 years. Do you think your measly pension is going to keep up with inflation 20 years from now, 30 years from now?

With the growing need to find other sources of income comes the growing onslaught of work from home programs and home based businesses.

Just remember, there are some good opportunities out there but, most are designed to empty your bank account, not fill it. Do your research first, or let someone do it for you.

As you know, we have been experiencing one of the most challenging times in our country's history.

During the past few months, we've encountered a housing bubble, credit crisis, a bear market in stocks, significant increase in unemployment rate, continuous increase in commodities such as food and energy prices and more.

As a result of these problems, the government has taken serious action to stabilize the country's economic condition to avoid another "Great Depression." According to National Bureau of Economic Research, the country is not yet officially experiencing a recession. Despite what the experts say, we should still prepare in advance for any possibility and take the appropriate steps to protect ourselves.

Remember, recessions come and go. Based on previous records, a recession may last anywhere between 8-16 months. At the same time, no other economic crisis within the last 50 years has been compared to the "Great Depression." What does this mean for you and what should you do? First and foremost, do not worry and do panic. Not only will the economy eventually cycle back to a better condition, but you can still effectively prepare for what's to come ahead.

Here are smart ways to help you survive a recession:

1. Spend wisely. Be sure to cut unnecessary spending. For example, if you usually buy coffee everyday, try to make coffee at home instead. You will be surprised on how much you will save. Tip: If you don't need it, don't buy it. Check Money Saving Tips for more ways on how to save significantly.

2. Pay-off your debt. If you can afford it, pay of all your credit card debts starting with the highest interest rates and be sure to avoid using the "plastic" unless for emergency situations. During a financial hardship, it becomes very tempting to use your credit cards but keep in mind that it won't help you in the long-run. Also, keeping your balances low and credit cards open will act as an emergency line when and if needed. Tip: Pay off your balances from purchases made from previous years before making new ones.

3. Continue Investing. When the economy is down, money becomes tight and most people stop making IRA and 401k contributions. You may want to give it some serious thought before you stop making these contributions, especially if your employer matches what you put in. In fact, during a recession, savvy investors like Warren Buffet consider these conditions as the best time to invest. If you have extra cash available, it may be time for you to get expert financial advice from your financial advisor as stock prices have become very low. Tip: Invest wisely. Diversify your portfolio to lower your risks. As the popular saying goes " Do not put your eggs in the same basket."

4. Work harder. During a recession, the unemployment rate goes up because companies are not generating enough revenue for numerous reasons. As a result, they lay off employees to cut down on their biggest expense, salary wages. With this in mind, be sure to work even harder and be proactive. Work extra hard to prove to your employer that you are indispensable. Tip: If you're scared of losing your job, make a back-up plan. Update your resume and start looking for a second job to be on the safe side.

5. Think long term. Based on statistics, recessions usually last for a period of 8-16 months. As mentioned earlier, this is not anything like we have seen since the "Great Depression." When making any financial decisions, be sure to be very cautious and conservative. Tip: If you do not need the money immediately, you may consider not selling any of your investments as the prices have gone very low. Your financial advisor may tell you to hold on to it and consider selling when the market has significantly improved. This way you can get the most out of your investments.