Glossary of Financial Terms

Term Definition
Asset An asset is anything of value that a person, business, or organization owns. Examples include cash, property, savings, and investments.
Basis Point A basis point is one one-hundredth of a percentage point. For example, 100 basis points equal 1%.
Bear Market A bear market is a period when stock prices are generally falling.
Benchmark A benchmark is a standard used to compare and evaluate investment performance.
Bloomberg Bloomberg is an electronic financial information system that provides market data, investment tools, and historical financial information.
Bond A bond is a type of loan made to a corporation or government. The bond issuer promises to repay the amount borrowed, plus interest, by a specific date.
Bond Rating A bond rating is an assessment of the likelihood that a bond issuer will repay its debt. Ratings are issued by credit rating organizations and help investors understand the level of risk.
Bull Market A bull market is a period when stock prices are generally rising.
Callable Bond A callable bond is a bond that the issuer may repay before its scheduled maturity date.
Capital Gain A capital gain is the increase in value between the time an investment is purchased and the time it is sold.
Certificate of Deposit A certificate of deposit, or CD, is a deposit made at a financial institution for a specific period of time. CDs typically earn interest and may have limits on early withdrawal.
Collateral Collateral is property or another asset pledged to secure a loan. If the loan is not repaid, the lender may be able to take and sell the collateral.
Commercial Paper Commercial paper is a short-term debt instrument issued by a corporation or financial institution to raise money.
Common Stock Common stock represents ownership in a company. Common stockholders may have voting rights and may benefit if the company grows in value.
Coupon Rate A coupon rate is the interest rate that a debt issuer promises to pay to the holder of a bond or other debt instrument.
Debt Instrument A debt instrument is a written promise to repay borrowed money. Examples include bonds, commercial paper, and certificates of deposit.
Discount A discount occurs when a debt instrument is sold for less than its face value.
Discount Security A discount security is a debt instrument that is issued for less than its face value and repaid at full face value when it matures.
Dividend A dividend is money paid to shareholders when a company distributes a portion of its profits.
Face Value Face value, also called par value, is the stated value of a debt instrument.
Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation, or FDIC, is a federal agency that insures deposits at member banks.
Federal Funds Rate The Federal Funds Rate is the interest rate banks charge each other for overnight loans of funds held at Federal Reserve Banks.
Federal Reserve Bank A Federal Reserve Bank is one of the regional banks that make up the Federal Reserve System, the central bank of the United States.
Federal Reserve Board The Federal Reserve Board is the governing body of the Federal Reserve System. Its members are appointed by the President of the United States.
Federal Reserve System The Federal Reserve System is the central bank of the United States. It helps manage the nation’s money supply, interest rates, and banking system.
Fiscal Policy Fiscal policy refers to government decisions about taxation and spending.
Fitch Ratings Fitch Ratings is a credit rating organization that evaluates the creditworthiness of governments, businesses, and securities.
Fixed Income Investment A fixed income investment is an investment that pays a set or predictable rate of return, such as a bond.
Full Faith and Credit Full faith and credit refers to a government’s pledge to repay the principal and interest on certain debt obligations.
Government Accounting Standards Board The Government Accounting Standards Board, or GASB, establishes accounting and financial reporting standards for state and local governments.
Investment Fund An investment fund pools money from multiple investors and invests it in a variety of assets, such as stocks, bonds, or other funds.
Investment Grade Investment grade refers to securities that receive higher credit ratings and are generally considered to have lower risk of default.
Junk Bond A junk bond is a bond with a lower credit rating. These bonds are considered higher risk because the issuer may be more likely to default.
Linked Deposit Program A linked deposit program places public funds in approved financial institutions so those institutions can offer lower-cost loans to eligible borrowers.
Liquidity Liquidity means having enough cash available to pay bills or meet obligations without having to sell long-term assets.
Local Government Investment Pool A local government investment pool allows local governments to combine their funds for investment purposes. This can help improve investment management and returns.
Market Value Market value is the current price of an investment or asset based on what buyers are willing to pay and sellers are willing to accept.
Maturity Date The maturity date is the date when the principal amount of a debt instrument must be repaid.
Monetary Policy Monetary policy refers to Federal Reserve decisions that influence the nation’s money supply and interest rates.
Money Market The money market is a part of the financial market where short-term debt instruments are bought and sold.
Money Market Fund A money market fund invests in short-term debt instruments, such as commercial paper, certificates of deposit, and Treasury bills. These funds are generally designed to maintain a stable value while earning interest.
Mortgage-Backed Security A mortgage-backed security is an investment backed by payments from a pool of home mortgages.
Mutual Fund A mutual fund pools money from many investors and invests it in a mix of assets, such as stocks, bonds, or other securities. A fund manager makes investment decisions on behalf of the investors.
Nationally Recognized Statistical Rating Organization A Nationally Recognized Statistical Rating Organization, or NRSRO, is a credit rating organization recognized by federal regulators. These organizations rate the creditworthiness of companies, governments, and securities.
Net Asset Value Net asset value is the value of a fund’s total assets minus its liabilities, divided by the number of shares outstanding. It is often used to show a fund’s price per share.
Par Value Par value is the face value or principal amount of a debt instrument.
Pass-Through Security A pass-through security is a mortgage-backed investment in which homeowners’ payments pass through to investors.
Preferred Stock Preferred stock represents ownership in a company. Preferred stockholders usually do not have voting rights, but they typically receive dividends before common stockholders.
Premium A premium is the amount by which a debt instrument sells for more than its par value.
Principal Principal is the original amount of money borrowed, invested, or owed.
Prudent Investor Standard The prudent investor standard requires people responsible for investments to act with care, judgment, and caution when making investment decisions.
Rate of Return Rate of return is the profit or loss on an investment, usually expressed as a percentage.
Repurchase Agreement A repurchase agreement is a financial transaction in which one party sells securities and agrees to buy them back later, usually at a higher price.
Securities Securities are financial investments such as stocks, bonds, and money market instruments.
Standard & Poor’s Standard & Poor’s is a financial services company that provides credit ratings, market indexes, and investment research.
Stock A stock, also called a share, represents partial ownership in a company. The value of a stock can rise or fall based on the company’s performance and market conditions.
Time Deposit A time deposit is money placed in a financial institution for a specific period of time. A certificate of deposit is one common type of time deposit.
Trust A trust is a legal arrangement in which one party holds and manages assets for the benefit of another party.
Trustee A trustee is a person or organization responsible for managing assets held in a trust.
U.S. Government Agency Security A U.S. government agency security is a debt instrument issued by a federal agency or government-sponsored entity.
U.S. Treasury Security A U.S. Treasury security is a debt obligation issued by the federal government. Treasury bills are short-term securities, Treasury notes are medium-term securities, and Treasury bonds are long-term securities.
Yield Yield is the return or profit on an investment, usually expressed as an annual percentage.