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2 <br /> CERTIFICATES OF DEPOSIT- Certificates of Deposit,familiarly known as CDs, are certificates <br /> issued against funds deposited in a bank for a definite period of time and earning a specified <br /> rate of return. Certificates of Deposit bear rates of interest in line with money market rates <br /> current at the time of issuance. <br /> COLLATERAL: Property (as securities) pledged by a borrower to protect the interest of the <br /> lender. <br /> COMPETITIVE BID PROCESS -A process by which three or more institutions are contacted <br /> via the telephone or email to obtain interest rates for specific securities. <br /> CREDIT QUALITY- The measurement of the financial strength of a bond issuer. This <br /> measurement helps an investor to understand an issuer's ability to make timely interest <br /> payments and repay the loan principal upon maturity. Generally,the higher the credit quality <br /> of a bond issuer, the lower the interest rate paid by the issuer because the risk of default is <br /> lower. Credit quality ratings are provided by nationally recognized rating agencies. <br /> CREDIT RISK-The risk that another party to an investment transaction will not fulfill its <br /> obligations. Credit risk can be associated with the issuer of a security, a financial institution <br /> holding the entity's deposit, or a third party holding securities or collateral. Credit risk <br /> exposure can be affected by a concentration of deposits or investments in any one <br /> investment type or with any one party. <br /> CUSTODIAN -An independent third party(usually bank or trust company) that holds <br /> securities in safekeeping as an agent. <br /> DEALER-A dealer, as opposed to a broker, acts as a principal in all transactions, buying and <br /> selling for his own account. <br /> DEFEASE- To discharge the lien of an ordinance, resolution, or indenture relating to a bond <br /> issue, and in the process, render inoperative restrictions under which the issuer has been <br /> obliged to operate. Comment: Ordinarily an issuer may defease an indenture requirement by <br /> depositing with a trustee an amount sufficient to fully pay all amounts under a bond contract <br /> as they become due. <br /> DELIVERY VS PAYMENT -There are two methods of delivery of securities: Delivery vs. <br /> payment and delivery vs. receipt (also called free). Delivery vs. payment is delivery of <br /> securities with an exchange of money for the securities. Delivery vs. receipt is delivery of <br /> securities with an exchange of a signed receipt for the securities. <br /> DEPOSITORY INSURANCE - Insurance on deposits with financial institutions. For purposes <br /> of this policy statement, depository insurance includes: a) Federal depository insurance funds, <br /> such as those maintained by the Federal Deposit Insurance Corporation (FDIC)AND Federal <br /> Savings and Loan Insurance Corporation (FSLIC); and b) Public Deposit Protection <br /> Commission. <br /> 8 City of Everett Investment Policy(2017) <br /> 22 <br />