A MONEY.NET PROPERTY

A-B C-E F-I J-O P-R S-Z Abbreviations

This glossary is designed to outline common terms and calculations used throughout our web site. Some calculations may vary from one quote provider to another.

F - I

FACE AMOUNT CERTIFICATE — A type of investment company where an investor makes periodic payments and at the end of a specified time period, the company pays the investor the face amount of the plan.

FACE VALUE — The value of a bond that appears on the face of the bond. Face value is ordinarily the amount the issuer promises to pay at maturity. Face value is not an indication of market value. Face Value is also referred to as par value or principal amount.

FAMILY OF FUNDS — A group of mutual funds managed by the same sponsor. Typically investors may apply purchases in all funds (within the family) toward sales charge breakpoints, as well as allowing investors to switch from one fund to another as conditions change. See: Breakpoint.

FANNIE MAE — See: Federal National Mortgage Association.

FEASIBILITY STUDY — A study done for a new municipal revenue issue to determine the feasibility of the project. It would estimate the service needs, construction costs, and future revenues and expenses.

FEDERAL FARM CREDIT SYSTEM — A group of government agencies which extend credit to farmers. The system will raise money by selling "system-wide" debt instruments. See: Banks for Co-Ops, Consolidated Federal Intermediate Credit Banks, or Federal Land Bank.

FEDERAL FINANCING BANK (FFB) — Established by Congress. It is authorized to acquire any obligation that is issued or guaranteed by a federal agency with the exception of the Farm Credit System, the Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Corporation. This aids agencies in issuing obligations. The FFB borrows from the Treasury.

FED FUNDS (FEDERAL FUNDS) — (1) The overnight borrowing of reserves by a bank from another bank. (2) Immediately available funds (vs. Clearing House Funds).

FED FUNDS RATE — The rate banks charge each other on overnight loans of reserves held at the FRB. See: FED Funds.

FEDERAL HOME LOAN BANKS (FHLB) — Operate as a credit reserve system for savings-related institutions in the U.S. They are supervised by the Federal Home Bank Board.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) — Freddie Mae: Provides a secondary market for conventional residential mortgages. It issues a number of mortgage backed securities.

FEDERAL HOUSING ADMINISTRATION (FHA) — Federal agency that insures lenders against defaults on residential mortgages.

FEDERAL INTERMEDIATE CREDIT BANKS (FICB) — FICB's: Part of the Federal Farm Credit System. It provides intermediate-term loans for agricultural purposes.

FEDERAL LAND BANK (FLB) — Part of the Federal Farm Credit System. It provides long-term loans to farmers an ranchers for various agricultural purposes.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) — Fannie Mae: A privately owned corporation which provides a secondary market for federally guaranteed or insured mortgages as well as conventional mortgages. Its stock trades on the NYSE. It issues a number of different mortgage-backed securities.

FEDERAL OPEN MARKET COMMITTEE (FOMC) — A committee of the Federal Reserve Board which operates by buying and selling government securities in the open market. The Fed's open market operation is its most effective tool of monetary control. It is also referred to as the Open Market Committee or FOMC.

FEDERAL RESERVE BOARD — Governmental entity responsible for monetary policy within the United States. It seeks to control the supply of money and credit to control inflation and create a stable, growing economy.

FIDELITY BOND — Each securities firm is required to have a fidelity bond (insurance policy) to provide protection for its customers in the event of fraud.

FIDUCIARY — A person who is acting for another person and is therefore in a position of trust.

FIFO — See: First-in - first-out FILL OR KILL (FOK) — Immediately execute a transaction in its entirety, or cancel it.

FINANCIAL ADVISORY RELATIONSHIP — An agreement where by a broker/dealer is paid to provide advice to a municipality regarding a new issue of bonds.

FINANCIAL FUTURES — Futures contracts based on financial instruments such as U.S. Treasury bonds, CD's, and other interest-sensitive issues, currencies, and stock market indicators.

FINANCIAL GUARANTY INSURANCE COMPANY (FGIC) — See: Insured Bonds.

FINDER — A person who helps to arrange a transaction.

FIRM COMMITMENT — A type of underwriting where the underwriters agree to purchase the entire issue from the issuer. If they do not sell the entire issue, they cannot return the unsold portion to the issuer.

FIRST-IN FIRST-OUT (FIFO) — A method of inventory valuation which assumes the oldest inventory (first-in) is sold first (first-out) (vs. LIFO).

FISCAL POLICY — Involves taxation and government spending. It is conceived by the Office of Management and Budget and is approved by Congress.

FISCAL YEAR — A corporation's accounting year. Due to the nature of their particular business, some companies do not use the calendar year for their bookkeeping. A typical example is the department store which finds December 31 too early a date to close its books after the Christmas rush. For that reason many stores wind up their accounting year January 31. Their fiscal year, therefore, runs from February 1 of one year through January 31 on the next. The fiscal year of other companies may run from July 1 through the following June 30.

FITCH'S RATING SERVICE — A rating agency for certain specific types of municipal bonds.

FIVE PERCENT (5%) MARK-UP POLICY — An NASD guideline used when determining the price that a broker/dealer charges a customer or pays a customer for securities.

FIXED ANNUITY — An annuity contract in which the insurance company makes fixed (or guaranteed) dollar payments to the annuitant for the term of the contract (usually until he or she dies).

FIXED ASSETS — Those assets of a corporation which are not intended for sale. These include buildings, machinery, equipment, furniture, and fixtures.

FIXED CHARGES — A company's fixed expenses, such as bond interest, which it has agreed to pay whether or not earned, and which are deducted from income before earnings on equity capital are computed.

FLAT — This term means that the price at which a bond is traded includes consideration for all unpaid accruals of interest. Bonds which are in default of interest or principal are traded flat. Income bonds, which pay interest only to the extent earned are usually traded flat. All other bonds are usually dealt in "and interest", which means that the buyer pays to the seller the market price plus interest accrued since the last payment date. See: Accrued Interest.

FLOAT — (1) to issue or underwrite securities. (2) The number of shares of a corporation available to the investing public. (3) The time it takes for a check to clear the banking system.

FLOOR — Trading area where stocks and bonds are bought and sold on an exchange.

FLOOR BROKER — A member of an exchange who executes orders on the floor of the exchange to buy or sell any listed securities. See: Commission Broker and Two-Dollar Broker.

FLOWER BOND — A U.S. Treasury Bond which is accepted at face value to pay estate tax. It trades at a discount since it has a relatively low interest rate (3% to 4%).

FLOW OF FUNDS — The sequence of payment to different funds which will be used in a revenue issue. Usually Revenue Fund to Operations & Maintenance Fund to Debt Service Fund etc.

FOREIGN CURRENCY OPTIONS PRINCIPAL (FCOP) — See: Registered Options Principal.

FORMULA INVESTING — An investment technique. One formula calls for the shifting of funds from common shares to preferred shares or bonds as a selected market indicator rises above a certain predetermined point and the return of funds to common shares investments as the market average declines.

FORWARD PRICING — The method in which the price of a mutual fund transactions determined. Orders for the purchase of mutual fund shares will be executed at the next calculated NAV (plus sales charge if any). Likewise for shares being redeemed by the fund.

FOURTH MARKET — Direct trading of stock between institutional investors to avoid brokerage commissions. In some cases, this is done through the "Instinet" system.

FREDDIE MAC — See: Federal Home Loan Mortgage Corporation.

FREE AND OPEN MARKET — A market in which supply and demand are freely expressed in terms of price. Contrast with a controlled market in which supply, demand, and price may all be regulated.

FREE-RIDING — (1) When an underwriter does not make a legitimate offering of a hot issue, but instead holds back (retains) some securities for its own use. (2) When a client buys and sells securities without paying for them. See: Frozen Account.

FRONT-END LOAD — See: Contractual Plan.

FROZEN ACCOUNT — An account in which the customer has violated Reg. T by not paying within seven business days. A purchase or sale in a frozen account will only be done when sufficient funds or the securities are I the account.

FUNCTIONAL ALLOCATION — An arrangement between the general partner and limited partner of an oil and gas program in which the limited partners are charged the tax deductible expenses and the general partner bears non-deductible costs.

FUNDAMENTAL RESEARCH — Analysis of industries and companies based on such factors as sales, assets, earnings, products or services, markets, and management. As applied to the economy, fundamental research includes consideration of gross national product, interest rates, unemployment, inventories, savings, etc.

FUNDED DEBT — Usually interest-bearing bonds or debentures of a company. Could include long-term bank loans. Does not include short-term loans, preferred, or common stock. Relative to municipalities, it is the total outstanding bonded debt.

FUTURES — Exchange traded contracts specifying a future date of delivery or receipt of a certain amount of a specific tangible or intangible product. The commodities traded in futures markets include agricultural products like wheat, soybeans, and port bellies, metals, and financial instruments. Futures are used by business as a hedge against unfavorable price changes and by speculators who hope to profit from such changes.

GENERAL MORTGAGE BOND — A bond which is secured by a blanket mortgage on the company's property, but which may be outranked by one or more other mortgages.

GENERAL OBLIGATION BOND (G.O.) — A municipal bond secured by the taxing power of the issuer. It is also known as a full faith and credit bond since it is secured by the full faith, credit, and taxing power of the issuer.

GENERAL PARTNER — The partner in a limited partnership responsible for all management decisions of the partnership. The general partner has a fiduciary responsibility to act for the benefit of the limited partners. The general partner is fully liable for its actions. See: Limited Partner.

GILT-EDGED — High-grade bond issued by a company which has demonstrated its ability to earn a comfortable profit over a period of years and pay its bondholders their interest without interruption.

GINNIE MAE — See: Government National Mortgage Association.

GIVE-UP — A term with many different meanings. For one, a member of the Exchange on the floor may act for a second member by executing an order for him with a third member. The first member tells the third member that he is acting on behalf of the second member and "gives up" the second member's name rather than his own.

GOLD FIX — The setting of the price of gold by dealers (especially in a twice-daily London meeting at the central bank). The fix is the fundamental worldwide price for setting prices of gold bullion and gold-related contracts and products.

GOOD DELIVERY — Certain basic qualifications must be met before a security which has been sold may be delivered. The security must be in proper form to comply with the contact of sale and to transfer title to the purchaser.

GOOD FAITH DEPOSIT — The check which accompanies a syndicate's bid for a new municipal issue.

GOOD TILL CANCELLED ORDER (GTC) OR OPEN ORDER — An order to buy or sell which remains in effect until it is either executed or cancelled.

GOVERNMENT BONDS — Obligations of the U.S. Government, regarded as the highest grade securities issues.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATIN (GNMA) — Ginnie Mae: A wholly owned government corporation within the Department of Housing and Urban Development. It help raise funds for the mortgage market by guaranteeing securities backed by pools of mortgages.

GROSS NATIONAL PRODUCT (GNP) — The total value of goods and services produced by the economy in a given period. "Real GNP" measures economic production in constant dollars; which takes into account the effect of inflation.

GROUP ORDER — An order placed with a municipal syndicate where the entire syndicate (group) will share in the sales credit.

GROWTH STOCK — Stock of a company with a record of growth in earnings at a relatively rapid rate.

GUARANTEED — Refers to securities that have a guarantee, from a source other than the issuer; as to payment of principal, interest, or dividend.

HEAD AND SHOULDERS — A technical trading pattern that resembles a head and two shoulders. In a head and shoulders top formation,t eh stock reaches one plateau (the left shoulder), then goes still higher (the top of the head), and then drops back to the plateau again (the right shoulder). The head and shoulders top pattern signifies the reversal of an upward trend. A head and shoulders bottom pattern signifies the reversal of a downward trend.

HEDGING — The use of two nearly opposite-direction securities, instruments, or futures contracts as a means of attempting to reduce market risk.

HIGH — The highest price an issue has traded at during the trading day on any exchange.

HISTORIC REHABILITATION — A type of real estate D.P.P. designed to take advantage of a tax credit allowed for the restoration of older buildings.

HSTORICAL VOLATILITY (beta) — This number is based on the standard deviation of weekly returns over the last 26 weeks annualized by multiplication by the square root of 52. Returns are computed close to close. The higher the number the more volatile the stock.

HOLDER — The buyer or owner of a security; long.

HOLDING COMPANY — A corporation which owns the securities of another, in most cases with voting control.

HOLDING PERIOD — The time period that an investor has owned a security. It commences on the day after the purchase (day after trade date) and ends on the day of the sale (trade date). It determines whether a gain or loss is considered short-term or long-term.

HORIZONTAL SPREAD — See: Calendar Spread.

HOT ISSUE — When a new stock issue trades at an immediate premium (secondary market price on the effective date is above the new issue offering price). Purchase of shares of a hot issue by employees of brokerage firms, their immediate families, and other individuals is either prohibited or restricted.

HYPOTHECATION — The pledging of securities as collateral. For example, to secure the debit balance in a margin account.

IMMEDIATE OR CANCEL ORDER (IOC) — An order where as much of the order as possible must be executed immediately. Any part of the order that is not executed, is cancelled.

IMPLIED VOLATILITY — A mathematical calculation made using one of the option evaluation models, which includes the option premium observed on the market, as well as other important factors to help determine the option's volatility.

INCOME BOND — Generally income bonds promise to repay principal but to pay interest only when earned. In some cases unpaid interest on an income bond may accumulate as a claim against the corporation when the bond becomes due. An income bond may also be issued in lieu of preferred stock. Also called an Adjustment Bond.

INCOME FUND — A type of mutual fund whose portfolio consists of income producing securities such as bonds and preferred stock.

INCOME PROGRAM — An oil and gas D.P.P. designed to primarily generate income by purchasing and operating producing wells. (vs. Drilling Program).

INCOME STATEMENT — See: Earnings Report.

INCOME STOCK — A stock which pays a relatively high dividend.

INDENTURE — A written agreement under which bonds and debentures are issued, setting forth maturity date, interest rate, and other terms. It is the contract executed by the issuer and trustee (who acts for the bondholders). Also known as Deed of Trust.

INDEPENDENT BROKER — Member on the floor of the NYSE who executes orders for other brokers having more business at that time than they can handle themselves, or for firms who do not have their Exchange member on the floor. Formerly known as Two-Dollar Brokers from the time when these independent brokers received $2 per hundred shares for executing such orders. Their fees are paid by the commission brokers.

INDEX — (1) A statistical yardstick expressed in terms of percentages of a base year or years. For instance, the Federal Reserve Board's index of industrial production is based on 1967 as 100. An index is not an average. (2) Statistical measure of a group of stocks such as the S&P 500. The indices can be broad based 9which cover a wide range of companies and mirror the "market" as a whole) or narrow based 9which consist of securities from a particular industry).

INDEX FUND — A mutual fund with the objective to approximate the general market.

INDEX OPTION — Option contracts traded on an underlying index, not any particular security. Examples are S&P 100, Major Market Index, and NYSE Index Option Contracts.

INDICATION OF INTEREST — Non-binding indication of a client received before the effective date for the possible purchase of a new issue.

INDICATORS — (1) Measures of economic activity used by economics to predict or confirm the general direction of the economy as a whole. (2) Measures used by technical analysts to forecast the movement of a stock or the market in general.

INDUSTRIAL DEVELOPMENT BOND — A bond issued by a municipality which is secured by a lease agreement with a corporation.

INFLATION — The persistent and appreciable rise in the general level of prices. It is normally associated with periods of expansion and high employment.

INITIAL PUBLIC OFFERING (IPO) — The first public issue of stock from a company which has not been publicly traded before.

INSIDER — An officer or director of a corporation or any person owning 10% of the company's stock (and their families), or anyone with non-public (inside) information. Transactions in a corporation's stock by insiders is regulated by federal regulations. See: Rule 144.

INSTINET — See: Fourth Market.

INSTITUTIONAL INVESTOR — An organization whose primary purpose is to invest its own assets or those held in trust by it for others. Includes pension funds, investment companies, insurance companies, universities, and banks.

INSURED BONDS — Municipal bonds which are covered by a insurance policy which pledges that should the issuer fail to make a payment, the insurance company will pay all interest and principal due. Major insurers include MBIAC, AMBAC, FGIC, and BIGI.

INTANGIBLE ASSETS — Those assets of a corporation which are not physical. These include good will, trade marks, and patents.

INTANGIBLE DRILLING COSTS — The outlays associated with drilling an oil or gas well, which upon completion of the well have no physical value such as labor, geologist expense, core analysis, etc. Most of these costs are tax deductible in the year they are incurred.

INTERBANK MARKET — The unregulated international trading of foreign currencies between banks, which establishes foreign exchange rates.

INTEREST — Payments a borrower pays a lender for the use of his money. A corporation pays interest on its bonds to the bondholders.

INTEREST RATE OPTIONS — Option contracts traded on underlying debt instruments.

INTEREST RATE RISK — The risk that should interest rates rise, an investment in a fixed income security will decrease in value. This will cause a decrease in the overall return which the investor receives as it relates to newly issued securities.

INTERMEDIATION — The placement of money with financial intermediaries (banks, thrifts, insurance companies) which in turn invest in stocks, bonds, and/or mortgages. See: Disintermediation.

IN-THE-MONEY — Refers to an option with intrinsic value. For example: A call option in which the underlying security is selling above the strike price, or a put option in which the underlying security is selling below the strike price.

INTRA-STATE OFFERING — A new issue of securities which will be sold only to investors residing in one state. An intra-state issue is exempt from the filing provisions of the Securities Act of 1933 under Rule 147.

INTRINSIC VALUE — The amount that the market price of a stock is above the strike price of a call option or below the strike price of a put option o that stock (the in-the-money amount).

INVENTORY TURNOVER — Used by a fundamental analyst when examining a corporation's financial statement. It is the company's cost of goods sold (from the income statement) divided by the year-end inventory (from the balance sheet).

INVERTED YIELD CURVE — The curve formed when plotting yield vs. maturity during a period when short-term yields (interest rates) are higher than long-term yields. This occurs during periods of tight money and tight credit. It is also called a negative yield curve and descending yield curve.

INVESTMENT — The use of money for the purpose of making more money, to gain income or increase capital, or both.

INVESTMENT BANKER — Also known as an underwriter. An investment banker assists corporations in issuing new securities to the public. The usual practice is for one or more investment bankers to buy outright from a corporation a new issue of stocks or bonds. The group forms a syndicate to sell the securities to individuals and institutions. Investment bankers also distribute very large blocks of stock or bonds, perhaps held by an estate.

INVESTMENT COMPANY — A company or trust engaged in the business of investing in (and trading) securities. The definition includes face amount certificates, unit investment trusts, and management companies. There are two types of management companies, closed-end and open-end (mutual fund). Shares in closed-end investment companies, some of which are listed on the New York Exchange, are readily transferable in the open market and are bought and sold like other shares. Capitalization of these companies remains the same unless action is taken to change, which is seldom. Open-end funds (mutual funds) sell their own new shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them.

INVESTMENT COMPANY ACT OF 1940 — The federal law which regulates investment companies.

INVESTMENT COUNSEL — One whose principal business consists of acting as investment adviser and rendering investment supervisory services.

INVESTMENT GRADE — Refers to bonds rated in the top four rating categories by Moody's or Standard & Poors which are eligible for investment by fiduciaries. See: Legal List.

INVESTMENT INCOME — See: Portfolio Income.

INVESTMENT LETTER — A letter signed by an investor purchasing unregistered long securities under Regulation D in which the investor attests to the long-term investment nature of the purchase. These securities, also known as letter stock, must be held for a minimum of 2 years before they can be sold. See: Rule 144.

IRA — Individual Retirement Account. A pension plan with major tax advantages. Any worker with earned income can begin an IRA and contribute up to $2,000 annually. An IRA permits investment through intermediaries like mutual funds, insurance companies, and banks or directly in stocks and bonds through stock brokers.

IRA ROLLOVER — The reinvestment of assets received as a lump-sum distribution from a qualified tax-deferred retirement plan. Reinvestment may be the entire lump sum or a portion of that sum. If the reinvestment is done within 60 days, there are no tax consequences.

ISSUE — Any of a company's securities or the act of distributing such securities.

ISSUED SHARES — The amount of common shares which a corporation has sold (issued).

ISSUER — Refers to the organization issuing or proposing to issue a security.

INTERMARKET TRADING SYSTEM (ITS) — An electronic communications network now linking the trading floors of seven registered exchanges to foster competition among them in stocks listed on either the NYSE or AMEX and one or more regional exchanges. Through ITS, any broker or market-maker on the floor of any participating market can reach out to other participants for an execution whenever the nationwide quote shows a better price is available.