Laserfiche WebLink
6.A. -Page 19 of 40 <br />CITY OF REDWOOD CITY <br />INVESTMENT POLICY <br />BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment <br />portfolio. A benchmark should represent a close correlation to the level of risk and the average duration <br />of the portfolio's investments. <br />BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See <br />Offer. <br />BROKER: A broker brings buyers and sellers together for a commission. <br />CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a Certificate. Large- <br />denomination CD's are typically negotiable. <br />COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure <br />repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. <br />COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report of the City. It includes <br />basic financial statements for each individual fund prepared in conformity with Generally Accepted <br />Accounting Principles (GAAP). It also includes supporting schedules necessary to demonstrate <br />compliance with finance-related legal and contractual provisions, extensive introductory material, and a <br />detailed Statistical Section. <br />COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the <br />bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. <br />DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his <br />own account. <br />DEBENTURE: A bond secured only by the general credit of the issuer. <br />DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment <br />and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money <br />for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for <br />the securities. <br />DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement <br />of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts <br />based upon notional amounts whose value is derived from an underlying index or security (interest rates, <br />foreign exchange rates, equities or commodities). <br />DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower <br />than face value. A security selling below original offering price shortly after sale also is considered to be <br />at a discount. DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued a <br />discount and redeemed at maturity for full face value (e.g., U.S. Treasury Bills.) <br />DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. <br />DURATION: A measure of the sensitivity of the price (the value of principal) of a fixed-income investment <br />to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling <br />bond prices, while declining interest rates mean rising bond prices. <br />FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various <br />classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm <br />cooperatives, and exporters. <br />FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, <br />currently up to $250,000 per entity. <br />X7:7_\��7i�iljiiCj 1 •�r_r.�:rrr_�nsrn`�`���7.tirz�� <br />J" <br />25 <br />