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Insight to the “Paper Trading” Business

THE INFORMATION GIVEN BELOW IS FOR CONSULTATIVE PURPOSES ONLY AND IS NOT AN OFFER TO BUY SELL OR INVEST.
There are many forms of Promissory Notes and Bonds that are ‘Traded’ on a daily basis. We however will look at just two of the major Promissory Notes continuously passed and Traded throughout the financial world.
The first is an on demand note such as currency. A perfect example is shown on all United Kingdom notes as shown below.
The above is a sectional copy of a £20 note. The wording is by the Governor and Company of the Bank of England and states. “I PROMISE TO PAY THE BEARER ON DEMAND THE SUM OF TWENTY POUNDS”
The fact that this note is redeemable immediately, its open market value is its face value, allowing it to be exchanged for goods to that value or bought and sold at a higher or lower price than its face value as in the case of ForeX Trading, Currency Exchange; or when purchasing an Enhanced Investment Bond.
example: An insurance company may offer you an investment bond with a 102% initial allocation on commencement, in exchange for your cash today. That’s £102 for every £100 invested, provided you leave your money with them for a minimum period of say five years. In other words they swapped a five year promissory note for which you can do nothing with until maturity for an on demand promissory note (cash) which they can use immediately, purchasing investments and lending out as mortgages or loans, charging interest for the privilege.
A further example occurs in currency exchange, where you can pay more than the actual value of the currency being bought or you get less than the actual value when selling.
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