Page 432 - FY 2026-2027 Adopted Budget Book

investor. an investor with an agreement to
repurchase them at a fixed price on a fixed
PREMIUM: The difference between the date. The security “buyer” in effect lends the
purchase price of a security and its face “seller” money for the period of the
value at maturity when purchase price is agreement, and the terms of the agreement
greater than face value. are structured to compensate him for this.
Dealers use RP extensively to finance their
PRIMARY DEALER: Trading counterparties positions. When the Fed is said to be doing
of the New York Fed in its implementation RP, it
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 STANDARD : 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

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