Banking and finance sector jargon - What is Bank Discount Rate explain with an example.

Bank Discount Rate
The interest rate for short-term money-market instruments like commercial paper and Treasury bills. The bank discount rate is based on the instrument's par value and the amount of the discount.
The bank discount rate is the required rate of return of a safe investment guaranteed by the bank.

Assume an unsecured obligation (e.g., commercial paper) that matures in one year with a face value of  $1,000 and a purchase price of $970.

($1,000 - $970) = $30 discount
$30/$970 = 3.1% rate of interest

To simplify calculations when determining the bank discount rate, a 360-day year is often used.

Common terms in economics BOP and BOT - Balance Of Payments and Balance Of Trade - What is the difference between them?

Balance Of Payments (BOP)
A record of all transactions made between one particular country and all other countries during a specified period of time. BOP compares the dollar difference of the amount of exports and imports, including all financial exports and imports. A negative balance of payments means that more money is flowing out of the country than coming in, and vice versa.

Balance of payments may be used as an indicator of economic and political stability. For example, if a country has a consistently positive BOP, this could mean that there is significant foreign investment within that country. It may also mean that the country does not export much of its currency.

This is just another economic indicator of a country's relative value and, along with all other indicators, should be used with caution. The BOP includes the trade balance, foreign investments and investments by foreigners.

Balance Of Trade (BOT)
The difference between a country's imports and its exports. Balance of trade is the largest component of a country's balance of payments. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy. A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus.

Also referred to as "trade balance" or "international trade balance"

The balance of trade is one of the most misunderstood indicators of the U.S. economy. For example, many people believe that a trade deficit is a bad thing. However, whether a trade deficit is bad thing is relative to the business cycle and economy. In a recession, countries like to export more, creating jobs and demand. In a strong expansion, countries like to import more, providing price competition, which limits inflation and, without increasing prices, provides goods beyond the economy's ability to meet supply. Thus, a trade deficit is not a good thing during a recession but may help during an expansion.

Define Backtesting. What is the scope, advantages and disadvantages of system backtesting, with respect to online stock, forex, commodities futures trading

Backtesting - The process of testing a trading strategy on prior time periods. Instead of applying a strategy for the time period forward, which could take years, a trader can do a simulation of his or her trading strategy on relevant past data in order to gauge the its effectiveness.

Most technical-analysis strategies are tested with this approach.

When you backtest a theory, the results achieved are highly dependent on the movements of the tested period. Backtesting a theory assumes that what happens in the past will happen in the future, and this assumption can cause potential risks for the strategy.

For example, say you want to test a strategy based on the notion that Internet IPOs outperform the overall market. If you were to test this strategy during the dotcom boom years in the late 90s, the strategy would outperform the market significantly. However, trying the same strategy after the bubble burst would result in dismal returns. As you'll frequently hear: "past performance does not necessarily guarantee future returns".

Securities market jargon made easy - What do you mean by the term Bear Hug

Bear Hug
An offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth. A bear hug offer is usually made when there is doubt that the target company's management will be willing to sell.

The name "bear hug" reflects the persuasiveness of the offering company's overly generous offer to the target company. By offering a price far in excess of the target company's current value, the offering party can usually obtain an agreement. The target company's management is essentially forced to accept such a generous offer because it is legally obligated to look out for the best interests of its shareholders.

Disc brakes and drum brake - What is the difference between them. Which one is more efficient?

DISC BRAKES
Disc brakes are the most common and also most effective means of stopping a vehicle. This type of braking system usually consists of a disc that rotates at the same speed as the wheel to which it is attached, straddled by a brake caliper. The caliper contains brake pads which are operated by one or more small pistons that squeeze against the surface of the disc to slow it down or even stop it. Compared to the drum version, disc brakes operate much more efficiently at high temperatures and wet conditions, basically by having a more complete design.

DRUM BRAKES
A drum brake is made of a drum-shaped housing (which is usually out of cast iron) that is attached to the wheel. Inside the drum there are usually two brake shoes curved around the interior that are forced into contact with the inner drum. The contact of the pads with the inner section of the drum housing provides braking. Drum brakes are very simple and generally very effective, except under heavy or hard use and under wet conditions, which is why they are less and less common on modern cars.