public funding

Examples of public funding in the following topics:

• Staking the Desk: Unequal Funding

  • Because schools are funded by property taxes, schools in poor areas receive less funding then schools in wealthier areas.
  • In the United States, most public schools are funded primarily through local property taxes.
  • But unequal school funding may afford students from poorer families fewer opportunities, reinforcing the status quo.
  • As a result, there is less funding available for students who actually need it.
  • Examine the inequality in public school systems and the implications for a student's future

• Market Actors

  • Investors can include: pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, and hedge funds.
  • While there is no legal definition of mutual fund, the term is most commonly applied only to those collective investment vehicles that are regulated, available to the general public, and open-ended in nature.
  • Hedge funds are not considered a type of mutual fund.
  • A hedge fund is an fund that can undertake a wider range of investment and trading activities than other funds.
  • As a class, hedge funds invest in a diverse range of assets, but they most commonly trade liquid securities on public markets.

• Purchase Process

  • Most individuals purchase bonds via a broker or through bond funds.
  • Bonds are bought and traded mostly by institutions like central banks, sovereign wealth funds, pension funds, insurance companies, hedge funds, and banks.
  • Most individuals who want to own bonds purchase bonds via a broker or do so through bond funds.
  • Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation.
  • Most bond funds pay out dividends more frequently than individual bonds.

• The Federal Funds Rate

  • The Federal Funds rate (or fed funds rate) is the interest rate at which depository institutions (primarily banks) actively trade balances held at the Federal Reserve.
  • If a bank can borrow reserves cheaply, it can afford to offer loans to the public at lower rates and still make a profit.
  • On the other hand, if the Federal Funds rate is high, banks will not borrow reserves in order to issue low-interest loans to the public.
  • A high Federal Funds rate, therefore, has a contractionary effect on economic activity, while a low Federal Funds rate has an expansionary effect.
  • The graph shows the federal funds rate for the past fifty years.

• The Savings Association Insurance Fund (SAIF)

  • Between 1989 and 2006, there were two separate FDIC funds–Bank Insurance Fund (BIF), and Savings Association Insurance Fund (SAIF).
  • Between 1989 and 2006, there were two separate FDIC funds—the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF).
  • Among the highlights of this law was merging the BIF and the SAIF into a new fund, the Deposit Insurance Fund (DIF).
  • Between 1989 and 2006, there were two separate FDIC funds—the Bank Insurance Fund (BIF), and the Savings Association Insurance Fund (SAIF).
  • Explain why the Bank Insurance Fund and the Savings Association Insurance Fund were merged into the Deposit Insurance Fund

• Sinking Funds

  • A sinking fund is a method by which an organization sets aside money to retire debts.
  • A sinking fund may operate in one or more of the following ways:
  • Thus the balance sheet consists of Asset = Sinking fund, Liability = Bonds
  • One purpose of a sinking fund is to repurchase outstanding bonds.
  • Describe how a sinking fund operates in regards to a bond issue

• Role in Providing a Market for Loanable Funds

  • In the loanable funds market, market clearing is defined as the interest rate/loanable funds quantity where savings equal investment (the amount of capital needed for property, plant, and equipment based investments) .
  • Loanable funds are typically cash, but can also include other financial assets to serve as an intermediary.
  • Loanable funds are often used to invest in new capital goods.
  • The interest rate can also describe the rate of return from supplying or lending loanable funds.
  • When the supply and demand for loanable funds are equal, savings is equal to investment and the loanable funds market is in equilibrium at the prevailing interest rate.

• Investment Institutions

  • Investment institutions include mutual funds and finance companies.A mutual fund manager groups together funds from many investors and invests the money in a variety of stocks.Consequently, a mutual fund diversifies stocks, and it lowers investors' risk.For example, you start your own mutual fund and offer investors a chance to invest in this fund.You take the money and buy 30 different corporate stocks.The Coca-Cola stock rises one day while the value of IBM stock falls.Overall, the average of the fund's 30 stocks should earn a return to your fund and to the investors.If you bought only Kmart corporate stock, you would lose your investment if this company bankrupts.
  • Mutual fund companies have different strategies and characteristics, and well-known mutual fund companies include Fidelity, Vanguard, and Dreyfus.Mutual fund companies develop strategies where they only buy stock in certain industries, large companies, or foreign company's stock.Furthermore, the mutual fund company may issue a fixed number of shares to the fund that we call closed-end mutual funds.Then investors may buy and sell these shares inover-the-counter markets, just like stock.Thus, the mutual fund company does not buy its shares back for closed-end mutual funds.A mutual fund company may offer another alternative called open-ended mutual funds.Mutual fund company can buy back shares to the fund, and the price of the shares becomes tied to the value of the stock in the fund.Finally, the mutual fund managers use two methods to earn profits.First, fund managers charge management fees for no-load funds, usually 0.5% of asset value.For the second method, the fund managers charge a commission for selling or purchasing of shares for load funds.The load reflects the commission that lowers the fund's value.
  • Money-market mutual funds are similar to mutual funds.However, the fund manager buys only money market securities, and the fund excludes corporate stock.Theory behind money-market mutual funds is simple.If you have five friends with $2,000 each, and they want to buy a Treasury bill with a minimum face value of $10,000, then your friends can pool their money together and buy one T-bill.Once the T-bill matured, your friends split the interest among themselves.
  • Money-market mutual funds are very popular because these funds offer check-writing privileges, and some investors do not want to tie up their funds for a long time.Moreover, the value of the fund does not change much, when interest rates changes because money market securities have maturities less than one year.In 2008, money-market mutual funds had assets of $3.8 trillion.
  • Commercial banks offer money market deposit accounts that are similar to the money-market mutual fund.Two funds differ because the Federal Deposit Insurance Corporation (FDIC) insures the money market deposit accounts, while it does not insure money-market mutual funds.If your bank bankrupted and you invested in money market deposit accounts, subsequently, you are guaranteed not to lose you funds up to the maximum insured amount.

• Bond Prices in an Open Economy

  • Then money becomes the loanable funds.
  • Nevertheless,loanable funds switch the roles of supply and demand.
  • Therefore, they represent the demand function for loanable funds.
  • Equilibrium price in the loanable funds market is the interest rate while the equilibrium quantity is the amount of loanable funds.
  • Consequently, the analysis uses the loanable funds approach.

• The Common Financial Instruments