| The ever increasing number of investment | | | | Fix - The setting of the price of gold by dealers |
| products and financial services in the marketplace | | | | (especially in a twice daily London meeting at the |
| today can be confusing. We have put together | | | | central bank); the fix is the fundamental |
| this glossary of financial definitions designed to | | | | worldwide price for setting prices of gold bullion |
| help you understand some of the more common | | | | and gold-related contracts and products.Good |
| investment and financial terms you may | | | | Delivery - Certain basic qualifications must be met |
| encounter. Your financial advisor can explain these | | | | before a security sold on the Exchange may be |
| terms more completely and discuss with you | | | | delivered. The security must be in proper form to |
| those which are relevant to your situation.Face | | | | comply with the contract of sale and to transfer |
| Value - The value of a bond that appears on the | | | | title to the purchaser.Good 'Til Canceled (GTC) or |
| face of the bond, unless the value is otherwise | | | | Open Order - An order to buy or sell that |
| specified by the issuing company. Face value is | | | | remains in effect until it is either executed or |
| ordinarily the amount the issuing company | | | | canceled.Government Bonds - Obligations of the |
| promises to pay at maturity. Face value is not an | | | | U.S. Government, regarded as the highest-grade |
| indication of market value. Sometimes referred to | | | | securities issues.Growth Stock - Stock of a |
| as par value.Financial Futures - Futures contracts | | | | company with a record of growth in earnings at a |
| based on financial instruments such as U.S. | | | | relatively rapid rate.Hedging - The purchase or sale |
| Treasury bonds, CDs and other interest-sensitive | | | | of a derivative security (such as options or |
| issues, currencies and stock market | | | | futures) in order to reduce or neutralize all or |
| indicators.Fiscal Year - A corporation's accounting | | | | some portion of the risk of holding another |
| year. Due to the nature of their particular | | | | security.Holding Company - A Corporation that |
| business, some companies do not use the | | | | owns the securities of another, in most cases |
| calendar year for their bookkeeping. A typical | | | | with voting control.Hypothecation - The pledging |
| example is the department store that finds | | | | of securities as collateral - for example, to secure |
| December 31 too early a date to close its books | | | | the debit balance in a margin account.Income Bond |
| after the Christmas rush. For that reason many | | | | - Generally income bonds promise to repay |
| stores wind up their accounting year January 31. | | | | principal but to pay interest only when earned. In |
| Their fiscal year, therefore, runs from February 1 | | | | some cases unpaid interest on an income bond |
| of one year through January 31 of the next. The | | | | may accumulate as a claim against the |
| fiscal year of other companies may run from July | | | | corporation when the bond becomes due. An |
| 1 through the following June 30. Most companies, | | | | income bond may also be issued in lieu of |
| though, operate on a calendar year basis.Fixed | | | | preferred stock.Indenture - A written agreement |
| Charges - A company's fixed expenses, such as | | | | under which bonds and debentures are issued, |
| bond interest, which it has agreed to pay whether | | | | setting forth maturity date, interest rate, and |
| or not earned, and which are deducted from | | | | other terms.Index - A statistical yardstick |
| income before earnings on equity capital are | | | | expressed in terms of percentages of a base |
| computed.Flat Income Bond - This term means | | | | year or years. For instance, the NYSE Composite |
| that the price at which a bond is traded includes | | | | Index of all NYSE common stocks is based on |
| consideration for all unpaid accruals of interest. | | | | 1965 as 50. An index is not an average.Institutional |
| Bonds that are in default of interest or principal | | | | Investor - An organization whose primary |
| are traded flat. Income bonds that pay interest | | | | purpose is to invest its own assets or those held |
| only to the extent earned are usually traded flat. | | | | in trust by it for others. Includes pension funds, |
| All other bonds are usually dealt in "and interest," | | | | investment companies, insurance companies, |
| which means that the buyer pays to the seller | | | | universities and banks.Interest - Payments |
| the market price plus interest accrued since the | | | | borrowers pay lenders for the use of their |
| last payment date.Floor - The huge trading area - | | | | money. A Corporation pays interest on its bonds |
| about the size of a football field - where stocks, | | | | to its bondholders.Interrogation Device - A |
| bonds and options are bought and sold on the | | | | computer terminal that provides market |
| New York Stock Exchange.Floor Broker - A | | | | information - last sale price, quotes, volume, etc. - |
| member of the Stock Exchange who executes | | | | on a screen or paper tape.Intrinsic Value - The |
| orders on the floor of the Exchange to buy or sell | | | | dollar amount of the difference between the |
| any listed securities.Formula Investing - An | | | | exercise price of an option and the current cash |
| investment technique. One formula calls for the | | | | value of the underlying security. Intrinsic value and |
| shifting of funds from common shares to | | | | time value are the two components of an option |
| preferred shares or bonds as a selected market | | | | premium, or price.Investment - The use of |
| indicator rises above a certain predetermined point | | | | money for the purpose of making more money, |
| - and the return of funds to common share | | | | to gain income or increase capital, or |
| investments as the market average declines.Free | | | | both.Investment Banker - Also known as an |
| and Open Market - A market in which supply and | | | | underwriter. The "middleman" between the |
| demand are freely expressed in terms of price. | | | | corporation issuing new securities and the public. |
| Contrasts with a controlled market in which | | | | The usual practice is for one or more investment |
| supply, demand and price may all be | | | | bankers to buy outright from a corporation a new |
| regulated.Fundamental Research - Analysis of | | | | issue of stocks or bonds. The group forms a |
| industries and companies based on such factors | | | | syndicate to sell the securities to individuals and |
| as sales, assets, earnings, products or services, | | | | institutions. Investment bankers also distribute |
| markets and management. As applied to the | | | | very large blocks of stocks or bonds - perhaps |
| economy, fundamental research includes | | | | held by an estate.Investment Company - A |
| consideration of gross national product, interest | | | | Company or trust that uses its capital to invest in |
| rates, unemployment, inventories, savings, | | | | other companies. There are two principal types: |
| etc.Funded Debt - Usually interest-bearing bonds | | | | the closed-end and the open-end or mutual fund. |
| or debentures of a company. Could include | | | | Shares in closed-end investment companies, some |
| long-term bank loans. Does not include short-term | | | | of which are listed on the New York Stock |
| loans, preferred or common stock.Futures - | | | | Exchange, are readily transferable in the open |
| Exchange traded contracts specifying a future | | | | market and are bought and sold like other shares. |
| date of delivery or receipt of a certain amount of | | | | Capitalization of these companies remains the |
| a specific tangible or intangible product. The | | | | same unless action is taken to change, which is |
| commodities traded in futures markets include | | | | seldom. Open-end funds sell their own shares to |
| stock index futures, agricultural products like | | | | investors, stand ready to buy back their old |
| wheat, soybeans and pork bellies; metals; and | | | | shares, and are not listed. Open-end funds are so |
| financial instruments. Futures are used by business | | | | called because their capitalization is not fixed; they |
| as a hedge against unfavorable price changes, and | | | | issue more shares as people want |
| by speculators who hope to profit from such | | | | them.Investment Counsel - One whose principal |
| changes.General Mortgage Bond - A bond that is | | | | business consists of acting as investment adviser |
| secured by a blanket mortgage on the company's | | | | and rendering investment supervisory |
| property but may be outranked by one or more | | | | services.IRA - Individual Retirement Account. A |
| other mortgages.Gilt-Edged - High-grade bond | | | | pension plan with tax advantages. IRA permits |
| issued by a company that has demonstrated its | | | | investment through intermediaries like mutual |
| ability to earn a comfortable profit over a period | | | | funds, insurance companies and banks or directly |
| of years and pay its bondholders their interest | | | | in stocks and bonds through stockbrokers.Issue - |
| without interruption.Give-Up - A term with many | | | | Any of a company's securities, or the act of |
| different meanings. For one, a member of the | | | | distributing such securities.Keogh Plan - Tax |
| Exchange on the floor may act for a second | | | | advantaged personal retirement program that can |
| member by executing an order for him or her | | | | be established by a self-employed individual.More |
| with a third member. The first member tells the | | | | financial definitions can be found by visiting |
| third member that he or she is acting on behalf of | | | | SorensenAmerica's Financial Guide can be found at |
| the second member and "gives up" the second | | | | ==> Subscribe to Money Basics via - Are you |
| member's name rather than his or her own.Gold | | | | ready for financial freedom? |