Page 569 - Bedford-FY24-25 Budget

investor. is lending money, that is, increasing bank reserves.
PREMIUM: The difference between the purchase
price of a security and its face value at maturity
when purchase price is greater than face value.
PRIMARY DEALER: Trading counterparties of
the New York Fed in its implementation of
monetary policy. They are also expected to make
markets for the New York Fed on behalf of its
official accountholders as needed, and to bid on a
pro-rata basis in all Treasury auctions at reasonably
competitive prices.
PRUDENT PERSON RULE: An investment
standard where Investments shall be made with
judgment and care, under prevailing circumstances,
that a person of prudence, discretion, and
intelligence would exercise in the management of
the person's own affairs, not for speculation, but for
investment, considering the probable safety of
capital and the probable income to be derived.
Investment of funds shall be governed by the
following investment objectives, in order of
priority:
(1) preservation and safety of principal; (2)
liquidity; and (3) yield.
RATE OF RETURN: The yield obtainable on an
investment based on its purchase price. This may
be the amortized yield to maturity on an investment.
REPURCHASE AGREEMENT (RP OR REPO): A
written contract covering all future transactions
between the parties to repurchase-reverse
repurchase transactions that establishes each party's
rights and obligations. An agreement will often
specify, among other things, the right of the buyer-
lender to liquidate the underlying securities in the
event of default by the seller-borrower. In a
transaction, the holder of securities sells these
securities to an investor with an agreement to
repurchase them at a fixed price on a fixed date. The
security “buyer” in effect lends the “seller” money
for the period of the agreement, and the terms of the
agreement are structured to compensate him for
this. Dealers use RP extensively to finance their
positions. When the Fed is said to be doing RP, it
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SAFEKEEPING: A service to customers rendered
by banks for a fee whereby securities and valuables
of all types and descriptions are held by the bank for
protection.
SECONDARY MARKET: A market made for the
purchase and sale of outstanding issues following
the initial distribution.
SECURITIES & EXCHANGE COMMISSION:
Agency created by Congress to protect investors in
securities transactions by administering securities
legislation.
TREASURY BILLS: A non-interest-bearing
discount security issued by the U.S. Treasury to
finance the national debt. Most bills are issued to
mature in three months, six months, or one year.
TREASURY BONDS: Long-term coupon bearing
U.S. Treasury securities issued as direct obligations
of the U.S. Government and having initial
maturities of more than 10 years.
TREASURY NOTES: A medium-term coupon
bearing U.S. Treasury securities issued as direct
obligation of the U.S. Government and having
initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE (Rule 15c3-1):
Requires that firms must at all times have and
maintain net capital at specific levels to protect
customers and creditors from monetary losses that
can occur when firms fail.
YIELD: The rate of annual income return on an
investment, expressed as a percentage. (a)
CURRENT YIELD is obtained by dividing the
current dollar income by the current market price
for the investment. (b) NET YIELD or YIELD TO
MATURITY is the current income yield minus any
premium above par or plus any discount from par in
purchase price, with the adjustment spread over the
period from the date of purchase to the date of
maturity of the bond.