Financial Terms Term Fed Funds

Definition of Term Fed Funds

Term Fed Funds

fed funds sold for a period of time longer than overnight.

Related Terms:

12b-1 funds

Mutual funds that do not charge an upfront or back-end commission, but instead take out up to
1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an
arrangement allowed by the SEC's Rule 12b-I (passed in 1980).

Beta equation (Mutual Funds)

The beta of a fund is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]
where: n = # of observations (36 months)
x = rate of return for the S&P 500 Index
y = rate of return for the fund

Beta (Mutual Funds)

The measure of a fund's or stocks risk in relation to the market. A beta of 0.7 means
the fund's total return is likely to move up or down 70% of the market change; 1.3 means total return is likely
to move up or down 30% more than the market. Beta is referred to as an index of the systematic risk due to
general market conditions that cannot be diversified away.

Coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and
independent variables in a regression analysis; for instance, the percentage of variation in the return of an
asset explained by the market portfolio return.

coefficient of determination

a measure of dispersion that
indicates the “goodness of fit” of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model

Cost of funds

Interest rate associated with borrowing money.

Credit Terms

Conditions under which credit is extended by a lender to a borrower.

Deterministic models

Liability-matching models that assume that the liability payments and the asset cash
flows are known with certainty. Related: Compare stochastic models

Disintermediation

Withdrawal of funds from a financial institution in order to invest them directly.

Dividend yield (Funds)

Indicated yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not
redemption charges.

EFT (electronic funds transfer)

funds which are electronically credited to your account (e.g. direct deposit), or electronically debited from your account on an ongoing basis (e.g. a pre-authorized monthly bill payment, or a monthly loan or mortgage payment). A wire transfer is a form of EFT.

Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.

Endowment funds

Investment funds established for the support of institutions such as colleges, private
schools, museums, hospitals, and foundations. The investment income may be used for the operation of the
institution and for capital expenditures.

Euro-medium term note (Euro-MTN)

A non-underwritten Euronote issued directly to the market. Euro-
MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are
under five years.

Fed

See federal Reserve System.

Federal agency securities

Securities issued by corporations and agencies created by the U.S. government,
such as the federal Home Loan Bank Board and Ginnie Mae.

Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of
institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.

Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.

Federal Employer Identification Number

A unique identification number issued
by the federal government used for payroll purposes to identify the company
when it deals with the Internal Revenue Service.

Federal Financing Bank

A federal institution that lends to a wide array of federal credit agencies funds it
obtains by borrowing from the U.S. Treasury.

Federal funds

Non-interest bearing deposits held in reserve for depository institutions at their district federal
Reserve Bank. Also, excess reserves lent by banks to each other.

Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.

Federal funds rate

This is the interest rate that banks with excess reserves at a federal Reserve district bank
charge other banks that need overnight loans. The fed funds rate, as it is called, often points to the direction
of U.S. interest rates.

Federal Funds Rate

The interest rate at which banks lend deposits at the federal Reserve to one another overnight.

Federal Home Loan Banks

The institutions that regulate and lend to savings and loan associations. The
federal Home Loan Banks play a role analogous to that played by the federal Reserve Banks vis-à-vis
member commercial banks.

Federal Insurance Contributions Act of 1935 (FICA)

A federal Act authorizing the government to collect Social Security and Medicare payroll taxes.

Federal Open Market Committee (FOMC)

fed committee that makes decisions about open-market operations.

Federal Reserve Banks

The twelve district banks in the federal Reserve System.

Federal Reserve Board

Board of Governors of the federal Reserve System.

Federal Reserve System

The central bank of the U.S., established in 1913, and governed by the federal
Reserve Board located in Washington, D.C. The system includes 12 federal Reserve Banks and is authorized
to regulate monetary policy in the U.S. as well as to supervise federal Reserve member banks, bank holding
companies, international operations of U.S.banks, and U.S.operations of foreign banks.

Federal Reserve System

The central banking authority responsible for monetary policy in the United States.

Federal Reserve (the Fed)

The central bank in the United States, responsible for setting interest rates.

Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.

Federally related institutions

Arms of the federal government that are exempt from SEC registration and
whose securities are backed by the full faith and credit of the U.S. government (with the exception of the
Tennessee Valley Authority).

Fedwire

A wire transfer system for high-value payments operated by the federal Reserve System.

Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or

financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.

Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.

Financial Intermediation

The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.

Flexible Term

Optional periods of time which the conditions of a contract will be carried out.

Forward Fed funds

fed funds traded for future delivery.

Freddie Mac (Federal Home Loan Mortgage Corporation)

A Congressionally chartered corporation that
purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and
securitizes these mortgages for sale into the capital markets.

Funds From Operations (FFO)

Used by real estate and other investment trusts to define the cash flow from
trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly
used is funds Available for Distribution (FAD), which is FFO less capital investments in trust property and
the amortization of mortgages.

growth funds

Mutual funds that seek long-term capital growth. This type of fund invests primarily in equity securities.

income funds

Mutual funds that seek regular income. This type of fund invests primarily in government, corporate and other types of bonds, debt securities, and other income producing securities and in certain circumstances can also hold common and preferred shares.

index funds

Mutual funds that aim to track the performance of a specific stock or bond index. This process is also referred to as indexing and passive management.

Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.

Intermediary

An independent third party that may act as a mediator during negotiations.

Intermediate Good

A good used in producing another good.

Intermediate-term

Typically 1-10 years.

Intermediation

Investment through a financial institution. Related: disintermediation.

internally generated funds

Cash reinvested in the firm; depreciation plus earnings not paid out as dividends.

Venture capital corporations established by labour unions. They function as other venture capital corporations but are subject to government regulation.

Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a

Long-term

In accounting information, one year or greater.

Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.

Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.

Long-term debt

A debt for which payments will be required for a period of more than
one year into the future.

Long Term Debt

Liability due in a year or more.

Long-term debt/capitalization

Indicator of financial leverage. Shows long-term debt as a proportion of the
capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and
common stockholder equity.

Long-term debt ratio

The ratio of long-term debt to total capitalization.

Long-term debt to equity ratio

A capitalization ratio comparing long-term debt to shareholders' equity.

Long-term financial plan

Financial plan covering two or more years of future operations.

Long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year.

LONG-TERM LIABILITIES

Bills that are payable in more than one year, such as a mortgage or bonds.

Long-term liabilities

Amounts owing after more than one year.

Longer-Term Fixed Assets

Assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.

Medium-term note

A corporate debt instrument that is continuously offered to investors over a period of
time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.

NSF (non-sufficient funds)

This appears on your statement if there are insufficient funds in your account to cover a cheque that you have written or a pre-authorized payment that you have already arranged. You will be charged a service fee for non-sufficient funds.

Other long term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations
not requiring interest payments that must be paid over a period of more than 1 year.

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate

Repayment Terms

The length of time given a borrower by a lender to repay a debt and the frequency of principal payments which the borrower has to meet.

savings funds

Mutual funds that seek to preserve capital. This type of fund invests primarily in short-term securities with an average term to maturity of one year or less, or in the case of money market funds, 90 days or less.

Shareholders’ funds

The capital invested in a business by the shareholders, including retained profits.

Short-term financial plan

A financial plan that covers the coming fiscal year.

Short-term investment services

Services that assist firms in making short-term investments.

Short-term solvency ratios

Ratios used to judge the adequacy of liquid assets for meeting short-term
obligations as they come due, including
1) the current ratio,
2) the acid-test ratio,
3) the inventory turnover ratio, and
4) the accounts receivable turnover ratio.

Short-term tax exempts

Short-term securities issued by states, municipalities, local housing agencies, and
urban renewal agencies.

Surplus funds

Cash flow available after payment of taxes in the project.

Term

See term to maturity.

Term

This is usually the duration of a loan.

term

The period of time during which a financial contract – such as a GIC or a loan – is in force.

Term

The time period during which a policy is in force, or the time it takes for a policy to reach maturity.

Term bonds

Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is
payable at maturity. Related: serial bonds

Term Deposit

An interest-earning bank deposit that cannot be withdrawn without penalty until a specific time.

Term insurance

Provides a death benefit only, no build-up of cash value.

Term Life

A product that provides life coverage for a specified duration typically not beyond the age of 75.

Term life insurance

A contract that provides a death benefit but no cash build-up or investment component.
The premium remains constant only for a specified term of years, and the policy is usually renewable at the
end of each term.

Term Life Insurance

A plan of insurance which covers the insured for only a certain period of time and not necessarily for his or her entire life. The policy pays a death benefit only if the insured dies during the term.

Term loan

A bank loan, typically with a floating interest rate, for a specified amount that matures in between
one and ten years and requires a specified repayment schedule.

Term Loan

A secured loan made to business concerns for a specific period (normally three to ten years). It is repaid with interest, usually with periodical payments.

Excess of the yields to maturity on long-term bonds over those of short-term bonds.

Term repo

A repurchase agreement with a term of more than one day.
term structure of interest rates
Relationship between interest rates on bonds of different maturities usually
depicted in the form of a graph often depicted as a yield curve. Harvey shows that inverted term structures
(long rates below short rates) have preceded every recession over the past 30 years.

Term Sheet

A list of the major points of the proposed financing being offered by an investor.

Term structure

The relationship between the yields on fixed-interest
securities and their maturity dates. Expectation of changes in interest rates
affects term structure, as do liquidity preferences and hedging pressure. A
yield curve is one representation in the term structure.

Term Structure of Interest Rates

Relationship among interest rates on bonds with different terms to maturity.

Term to maturity

The time remaining on a bond's life, or the date on which the debt will cease to exist and
the borrower will have completely paid off the amount borrowed. See: Maturity.

Term to Maturity

Period of time from the present to the redemption date of a bond.