What Is a Partnership? A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits. There are several types of partnership arrangements. In particular, in a partnership business, all partners share liabilities and profits equally, while in others, partners may have limited liability. There also
What Is a Party Wall? In real estate terminology, a party wall is a shared wall that separates two separately rented or owned units. Party walls are most commonly found in apartments, condominiums, hotels, and office complexes, where different tenants will share a common structure. Party walls can be a non-structural wall, but laws in
What Is Par Value? Par value, also known as nominal or original value, is the face value of a bond or the value of a stock certificate, as stated in the corporate charter. Stock certificates issued for purchased shares show the par value. The par value of shares, or the stated value per share, is the
What Is a Par Yield Curve? A par yield curve is a graphical representation of the yields of hypothetical Treasury securities with prices at par. On the par yield curve, the coupon rate will equal the yield to maturity (YTM) of the security, which is why the Treasury bond will trade at par. The par
What Is Passive Activity? Passive activity is an income-generating activity that a taxpayer did not materially participate in during the tax year. The Internal Revenue Service (IRS) defines two types of passive activity: trade or business activities in which the taxpayer doesn’t materially participate. Unless the taxpayer is a real estate professional, rental activities usually
What Are Passive Activity Loss Rules? Passive activity loss rules are a set of IRS rules that prohibit using passive losses to offset earned or ordinary income. Passive activity loss rules prevent investors from using losses incurred from income-producing activities in which they are not materially involved. Being materially involved with earned or ordinary income-producing activities means the
What Is a Passive ETF? A passive exchange-traded fund (ETF) is a financial instrument that seeks to replicate the performance of the broader equity market or a specific sector or trend. Passive ETFs mirror the holdings of a designated index—a collection of tradable assets deemed to be representative of a particular market or segment. Investors can
What Is Passive Management? Passive management is a style of management associated with mutual and exchange-traded funds (ETF) where a fund’s portfolio mirrors a market index. Passive management is the opposite of active management in which a fund’s manager(s) attempt to beat the market with various investing strategies and buying/selling decisions of a portfolio’s securities.
What Is a Pass-Through Rate? The pass-through rate is the interest rate on a securitized asset, such as a mortgage-backed security (MBS), that is paid to investors once management fees, servicing fees, and guarantee fees have been deducted by the issuer of the securitized asset. It is often referred to as the net interest rate. Key Takeaways The
What Is a Pass-Through Certificate? Pass-through certificates are fixed-income securities that represent an undivided interest in a pool of federally insured mortgages put together by a government-sponsored agency, such as the Government National Mortgage Association (Ginnie Mae). How a Pass-Through Certificate Works A large percentage of mortgages that have been issued to borrowers are sold
