Author Archives: Melissa Hart

May 24 2014

Apple Returns to Bond Market

Investors flock to Apple’s $12 billion debt offering.

The demand for Apple’s new bond issues with maturities ranging from three to thirty years and rated double-A-plus, the second highest rating, reflects a corporate-debt market that is putting in a surprisingly strong performance this year.  The rate for Apple’s 3-year bonds was 1.068 percent; the rate for 30-year bonds was 4.483 percent–about 1 percent more than U.S. Treasury securities.

Although Apple has a healthy cash pile, about $150 billion, it chose to issue bonds to pay for expanding its stock buyback program and increasing its dividend to stockholders. According to many experts, the fact that Apple has such a large cash surplus and is currently the most valuable U.S. firm based on stock-market value helped assure bond buyers that there is little risk in Apple bonds.

For more information go to

http://online.wsj.com/news/articles/SB10001424052702304393704579531591100806848#printMode

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Remind students that once a bond is issued, the price can increase or decrease because of the inverse relationship between a bond’s price and overall interest rates in the economy.  (Higher interest rates in the economy = lower prices for existing bonds; and, lower interest rates in the economy = higher prices for existing bonds.)
  • Explore different reasons why Apple chose to issue bonds instead of using some of its cash surplus.  (Reasons include taxation of cash held in off-shore accounts and financial leverage.)

Discussion Questions

  1. Apple chose to sell bonds to fund its share buyback program and increase dividends to stockholders.  What are the advantages of selling bonds instead of using part of its cash surplus?
  2. Why would a short-term bond pay lower interest than a long-term bond?
  3. Given your current age and financial situation, would you invest in Apple corporate bonds?  Why?
May 21 2014

Absurdities at the IRS

As strange as it may sound, U.S. federal tax law requires that stolen property, bribes, kickbacks, and income from other illegal activities be reported as income. And,  embezzlers, thieves, and bootleggers are allowed to take deductions for costs relating to generating that criminal “income.”

Due to an extensive network of hidden criminal earnings and witnesses unwilling to testify against him (for fear of their lives), infamous American gangster Al Capone was not prosecuted for illegal activities. He was, however, targeted and convicted of not paying taxes.

The government can collect taxes on illegal activity if it can be proven that an individual received income.  Soviet spy Aldrich Ames earned more than $2 million cash for espionage. He was charged with tax evasion because none of the money was reported on his tax return.

Regarding stolen property, IRS instructions note that  “if you steal property, you must report its fair market value in your income in that year you steal it, unless in the same year, you return it to its rightful owner.”

The IRS allows embezzlers, thieves, and bootleggers to take deductions for costs related to their criminal activity.  A taxpayer who was guilty of violating the Securities Act of 1933 was allowed to deduct the legal fees spent defending himself.

For additional information on “tax absurdities” go to

http://american.com/archive/2014/april/absurdities-at-the-irs?utm_source=today&utm_medium=paramount&utm_campaign=041414

Discussion Questions

  1. What may have been reasons for the tax law actions that may seem absurd?
  2. What changes would you recommend regarding current tax laws?
  3. How might a tax system be created to encourage business innovation and job creation?

Teaching Suggestions

  • Have students research various unusual examples of deductions that have been allowed or disallowed by the IRS.
  • Have students present proposals for revision in the current tax laws.
May 17 2014

Developing Career Capital and Achieving Success

Most career planning experts believe that “career capital” is vital for success.  Career capital refers to differentiated skills that are both rare and valuable, and usually involve creativity, impact, control, or autonomy. A great job requires that you can offer something of value. Factors that contribute to building career capital include:

  •  an attitude of “what can I offer the world and my company?”
  • understanding what’s valuable in your career field by seeking varied expert opinions
  • continuing to expand your skill set
  • obtaining feedback to gain knowledge of your strengths and weaknesses
  • setting priorities on what will benefit your career
  • creating goals appropriate to your career stage

For additional information about developing career capital, go to

http://www.forbes.com/sites/laurashin/2013/05/22/7-steps-to-developing-career-capital-and-achieving-success/

Discussion Questions

  1. Why are some people more successful in their careers than others?
  2. What factors might be used to measure career success?
  3. How might a person better prepare for future career success?

Teaching Suggestions

  • Have students create a list of attitudes, behaviors, and skills that they believe are important for career success.
  • Ask students to explain actions they are currently taking to enhance their future career success.

 

May 15 2014

Protect Your Personal Information and Money

Recent reports about thieves gaining access to sensitive personal information that can be used to commit fraud or steal money, sometimes involving major security breaches at large retailers such as Target stores.  While federal laws and industry practices generally limit losses for unauthorized transactions involving bank accounts, debit and credit cards, it pays to be proactive.

Be careful when you use social networking sites.  Scammers use social networking sites to gather details about individuals, such as their place or date of birth, a pet’s name, their mother’s maiden name, and other information that can help them figure out passwords–or how to reset them.  Even small amount of information can help them steal your identity, such as by answering security questions that control access to accounts.  According to Michael Benardo, Chief of the FDIC’s Cyber Fraud and Financial Crimes Section, “Don’t share your ‘page’ or access with anyone you don’t know and trust.  Criminals may pretend to be your ‘friend’  or relative to convince you to send money or divulge personal information.”

For additional information and tips on avoiding fraud at social media sites, go to the Internet Crime Complaint Center at

http://www.ic3.gov/media/2009/091001.aspx and http://www.fdic.gov/consumers/consumer/news/cnfall13/socialmedia.html

Discussion Questions

1.  What can you do to guard against scams involving fraudulent requests to wire money or send a prepaid card?

2.  Why should you be suspicious about unsolicited emails or text messages asking you to click on a link or open an attachment?

Teaching Suggestions

You may want to use the information in this blog and the websites to

*  Discuss the importance of regularly reviewing your transactions in your credit card and bank statements.

*  Carefully choose user IDs and passwords for your computers, mobile devices, and online accounts.

*  Periodically review your credit reports to make sure someone else has not obtained a credit card or a loan in your name.

May 11 2014

Billing Errors on Your Credit Card Statement

The Federal Deposit Insurance Corporation’s Response Center reports that billing disputes and error resolution problems and processes are the most common types of complaints it received in 2012 and 2013 related to credit cards.  And, according to the Consumer Financial Protection Bureau, many consumers are confused and frustrated by the process of challenging inaccuracies on their monthly statements.

Checking your statements periodically also can help you monitor your spending.  You may want to sign up for alerts on your mobile phone or through your email that inform you when your credit card has hit a specific balance amount or you are close to your credit limit.  Other alerts can remind you about an upcoming bill.

If you notice a billing error, such as an unauthorized charge on your statement, contact the card issuer as soon as possible.

 For additional information and guidance, see consumer information from the Federal Trade Commission at http://www.consumer.ftc.gov/articles/0219-fair-credit-billing.

 

Discussion Questions

1.  What might be some reasons for consumers to be confused and frustrated by the process of challenging inaccuracies on their monthly statements?

2.  What are advantages of checking your monthly credit card statements?

Teaching Suggestions

You may want to use the information in this blog post and the FTC website to

  • Have students make a short presentation with a summary of actions that might be taken to report billing errors to the credit card issuer and other federal consumer protection agencies.
  • Draft a sample letter to dispute a billing error.
  • Review the Fair Credit Billing Act to learn about protecting  their rights if  a billing error occurs.
May 7 2014

Even the IRS Chief Says Tax Code Is Too Complex

The nation’s chief tax collector made a rare plea for overhauling the nation’s tax laws, saying the Internal Revenue Service is eager ‘to do whatever we can’ to help Congress simplify the tax code.”

John Koskinen, who rarely discusses the nation’s tax policy, told reporters the IRS needs to be involved in tax reform discussion to make sure the “simplication really is simple.” According to Koskinen, the two issues most in need of an overhaul are the taxation of American companies doing business abroad and the alternative minimum tax.

Koskinen also said it was a mistake to attempt to reform the multitudes of tax credits, deductions, and exemptions one by one. He likened that approach to fighting a “guerrilla war” with special interests. He indicated he would prefer to tackle tax reform all at once. He said “the advantage of doing it all at once is that the lobbyists can’t all get in the door at the same time.”

The last major tax reform of the nation’s tax code occurred in 1986.

For more information go to

http://www.usatoday.com/story/news/politics/2014/04/02/irs-commissioner-urges-congress-to-simplify-tax-code/7215107/

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Point out how complex the IRS tax code is for both individuals and businesses.
  • Help students determine if they should file their own tax return or pay a professional.
  • Discuss the need for tax reform in order to create a simpler method of collecting the money needed to operate the government.

Discussion Questions

  1. Given your current situation, would you file your own tax return or would you use a professional?
  2. While everyone agrees the U.S. tax code is too complex and too confusing, major reform is unlikely. What are the obstacles to tax reform and why can’t Congress take steps to create a simpler tax code?
May 4 2014

Choosing a Credit Card? Ensure that Your Credit Report is Accurate

Correcting inaccuracies in your credit report may help you improve your credit history and credit score, which credit card issuers consider when deciding whether to offer you a card and how they will determine your interest rate and credit limit. You also can find out if an identity thief has opened credit cards or other accounts in your name.

By federal law, you are entitled to one free copy of your credit report every twelve months from each of the three major nationwide consumer reporting agencies (also called “credit bureaus”)—Equifax, Experian and TransUnion. Each company issues its own report, and because some lender do not provide information to all three of them, it’s useful to request your report from each one in order to get a comprehensive view of you credit history.

For additional information, go to

http://www.AnnualCreditReport.com; http://www.equifax.com; http://www.experian.com; http://www.transunion.com

Discussion Questions

1. Why is it important to check your credit reports every year?

2. Why should you request a credit report from each one of the three credit bureaus?

 

Teaching Suggestions

You may want to use the information in this blog and the above websites to discuss

* What should students do if they find inaccuracies in their credit reports?

* Have students draft a letter to the credit bureau to correct the errors in their credit report.

Apr 30 2014

Payday Loans

Loans with annual interest rates exceeding 400 percent continue to occur in our society.  Payday loans are often used to bridge a cash-flow shortage between paychecks. Also known as “cash advances” or “check loans,” they are usually expensive, small-dollar loans, of generally $500 or less. They offer quick and easy access to funds for consumers who may not qualify for other credit.

A recent Consumer Financial Protection Bureau (CFPB) study revealed that four out of five payday loans are rolled over or renewed within 14 days. The majority of payday-loan borrowers renew their loans so many times that they end up paying more in fees than the amount of money they originally borrowed.  This study also reported that:

  • only 15 percent of borrowers repay all of their payday debts when due without borrowing again within 14 days.
  • 20 percent default on a loan at some point, and
  • 64 percent renew at least one loan one or more times.

These actions often create exorbitant fees and charges, and keep the consumer in perpetual debt.

For additional information and a complete copy of the payday loan report go to http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf

Discussion Questions

  1. Why does the market for payday loans exist?
  2. What actions might be taken to avoid using payday loans?
  3. Recommend actions for people who are caught in the trap of payday loans.

 

Teaching Suggestions

  • Have students visit a payday loan office or an online payday loan provider to gain additional insight into this high-cost financial service.
  • Have students make a short presentation with a summary of actions that might be taken to avoid payday loans.
Apr 26 2014

The “Blended” Classroom.

Today, many students expect a more interactive learning experience involving technology. While not all students are best served by online classes, the use of blended (or hybrid) teaching can take advantage of both the face-to-face learning setting and technology-enhanced instruction.

In a blended class, part of the content delivery and instruction is through online delivery with students having some choice over time, place, path and pace. When planning and implementing a blended teaching approach, some suggested preliminary guidelines include:

  • Have a large vision but start small. Use selected elements of technology such as an online discussion board, student blog entries, or existing web-based videos.
  • Adapt your technology use based on your growing experiences. Ask students for their suggestions to enhance the interactive learning environment.
  • Use technology to enhance your existing learning goals. Make efficient use of online materials and other resources to improve what you already do.
  • Connect virtual instructional resources and experiences to the face-to-face learning environment. Keep students accountable for their online activities with application exercises and in-class assessment.
  • Move students from being consumers of information to producers of information with assignments that require comprehensive research reports, case study analyses, visual summaries (such as infographics), and student-created video productions.
  • Take advantage of resources not available to previous generations, such as online lectures of experts in the field and virtual tours.

For additional information on a blended teaching and flipped classrooms go to:

Discussion Questions

  1. What are potential benefits of using a blended teaching approach?
  2. What concerns might be associated with a blended teaching approach?
  3. What actions might you consider taking to move toward blended teaching.

Teaching Suggestions

  • Talk with students about their experiences with blended classrooms and the use of technology to enhance the learning process.
  • Conduct online research to obtain additional information on the experiences of people who make use of a blended learning environment.
Apr 23 2014

The Slacker’s Guide to Saving for Retirement

Whether retirement is coming soon or feels far away, it’s something you need to think about.

This article encourages students to make retirement planning a part of their budget and one of their financial goals.   It also points out the benefits of starting early—even if students can contribute only a small amount because of other obligations that include paying off student loans and other debt obligations, paying rent, buying groceries, and establishing an emergency fund.

A very good suggestion included in this article is to start by saving just $25 from each paycheck, and then increase the amount until someone feels they have reached a limit they are comfortable with.

Other suggestions include participating in a 401(k) account at work and using bonuses and salary increases to boost the amount contributed to your retirement account.

For more information, go to

http://finance.yahoo.com/news/slackers-guide-saving-retirement-113005671.html

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Encourage students to develop a long-term financial plan that includes retirement goals.
  • Discuss time value of money examples that show how small dollar amounts invested on a regular basis can help achieve long-term financial goals.
  • Launch a discussion about the different types of retirement accounts.

Discussion Questions

1.  Many people never begin saving or investing because there is never anything left over at the end of the month.  How can you find the money needed to begin saving and investing?

2.  Why should you begin to save for retirement now instead of waiting until later in life?