How do you benegfit from note buying?

Question

I am confused and a little mislead by the meaning I think. How can we make money from other's notes?

Answer 1

http://www.papersourceonline.com/subinfo.htm

http://www.noteworld.com/benefits/how.aspx

http://www.cashflows.org/

http://www.notes101.com/about_us.php

Answer 2

A note is a promise to pay in the future, either by installment or at a future date. People sometimes need money now so will try to sell the note for as much as they can get.
Because of interest rates, the note is not worth its face value, it has a lower Present Value (PV) or Net Present Value (NPV). Suppose the note was for $1000 to be paid in two years. If I bought the note for face value, the seller would have $1000 to put in the bank and earn money. If interest rates are 5%, he would have $1100 at the end of two years. And I would be giving up $100 I could have earned. So I would be willing to pay only about $910 for the note. He gets money now and I earn 5% on my investment in the note. (I am not being exact with numbers here.)
If I think the note is risky, I might be willing to pay even less, perhaps $850 or $800.
Same thing works out with periodic payments. That is why a Lottery winner has a choice of $50,000 a year for 20 years for a million dollars or the net present value which might be $400,000 (with higher taxes also). The lottery company (state) doesn't actually pay over all those years - it buys an annuity for a fixed amount that pays out the specified amout.