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9 <br /> DISCOUNT - 1. (n.) selling below par; e.g., a $1000 bond selling for $900. 2. (v.) anticipating <br /> the effects of news on a security's value; e.g., "The market had already discounted the effect <br /> of the labor strike by bidding the company's stock down." <br /> DIVERSIFICATION - Dividing available funds among a variety of securities and institutions so <br /> as to minimize market risk. <br /> EFFECTIVE RATE -The yield you would receive on a debt security over a period of time <br /> taking into account any compounding effect. <br /> FACE VALUE - The value of a bond stated on the bond certificate;thus, the redemption value <br /> at maturity. Most bonds have a face value, or par, of$1,000. <br /> FEDERAL AGENCY SECURITIES - Several government-sponsored agencies, in recent years, <br /> have issued short and long-term notes. Such notes typically are issued through dealers, <br /> mostly investment banking houses. These Federal government-sponsored agencies were <br /> established by the U.S. Congress to undertake various types of financing without tapping the <br /> public treasury. In order to do so, the agencies have been given the power to borrow money <br /> by issuing securities, generally under the authority of an act of Congress.These securities are <br /> highly acceptable and marketable for several reasons, mainly because they are exempt from <br /> state, municipal and local income taxes. Furthermore, agency securities must offer a higher <br /> yield than direct Treasury debt of the same maturity to find investors, partly because these <br /> securities are not direct obligations of the Treasury. The main agency borrowing institutions <br /> are the Federal National Mortgage Association (FNMA), the Federal Home Loan Bank System <br /> (FHLB), and the Federal Farm Credit System (FFCS). <br /> FHLB - FEDERAL HOME LOAN BANK SYSTEM - consists of twelve Federal Home Loan <br /> Banks. The FHLB issues, in addition to long-term bonds, coupon notes with maturities of up <br /> to one year. Their attractiveness stems from their investment denominations of$10,000 to $1 <br /> million. <br /> FEDERAL DEPOSIT INSURANCE (FDIC) -A Federal institution that insures bank deposits. <br /> The current limit is up to $100,000 per depository account. <br /> FEDERAL FUNDS RATE -The rate of interest at which Federal Funds are traded between <br /> banks. Fed Funds are excess reserves held by banks that desire to invest or lend them to <br /> banks needing reserves.The particular rate is heavily influenced through the open market <br /> operations of the Federal Reserve Board.Also referred to as the "Fed Funds rate." <br /> FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - FNMA, like GNMA,was <br /> chartered under the Federal National Mortgage Association Act in 1938. FNMA is a Federal <br /> corporation working under the auspices of the Department of Housing and Urban <br /> Development, HUD.It is the largest single provider of residential mortgage funds in the <br /> United States. Fannie Mae, as the corporation is called, is a private stockholder-owned <br /> corporation. The corporation's purchases include a variety of adjustable mortgages and <br /> second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid <br /> 9 City of Everett Investment Policy(2017) <br /> 23 <br />