Glossary of Terms

Anticipation Notes An instrument of debt financing where a specific source of tax revenue is pledged for repayment.
Amortization The systematic reduction of the amount owed on a debt issue through periodic payments of principal.
Basis Point The smallest measure in quoting yields on notes and bonds. A basis point is one one-hundredth of one percent. For example, 100 basis points = 1.00% or .01.
Benchmark A standard used to compare and evaluate the performance of an investment.
Bond A debt instrument where a corporation or government borrows money from investors in return for periodic interest payments, as well as the return of the initial investment after a set period of time.
Bond Rating An assessment of default risk by a third-party rating agency. It may incorporate an assessment of relative seniority or ultimate recovery in the event of default. The higher the rating, the greater the perceived capacity of a debt issuer to meet its financial obligations. Ratings range from AAA (highest quality) to D (in default) for debt instruments, and A1/P1 (highest quality) to D (in default) for money market instruments.
Book Value The adjusted cost of a bond, which may differ from the current market value of the bond.
Book Yield The yield of an investment calculated using its book value.
CD A Certificate of Deposit, also known as a CD, is a debt instrument issued by a bank where the investor gets a higher interest rate than a standard savings account, but cannot access the money for a set period of time.
Certificate of Participation A lease-financing mechanism where the government enters into an agreement to make annual lease payments for the use of an asset over some period, after which the title for the asset transfers to the government.
Commercial Paper A short-term debt instrument issued by a corporation.
Debt Instrument A generic term for an entity's promissory note to repay money borrowed from investors, along with interest, at a certain maturity date, e.g. a bond or CD.
Fixed Income Security A security that pays a fixed rate of interest until maturity.
Liability An entity's current and future obligations and debts.
Liquidity How easily an investment or asset can be converted into cash. Something that can be converted easily is said to be "highly liquid."
Market Value The value of an asset based on current market prices.
Maturity The date at which the principal amount of a bond, note, or other debt instrument is payable to investors.
Money Market Fund A mutual fund that aims at stability and liquidity by investing in short-term securities.
Prudent Investor Standard An investment standard outlining the fiduciary responsibilities of public funds investors relating to investment practices. The Colorado Uniform Prudent Investor Act (CRS 15-1.1-102) establishes certain considerations that determine prudence.
Realized Gain/ Loss A profit/loss that results from the sale of an asset when the current market value exceeds or is less than the adjusted cost basis of the asset. The gain/loss is realized because the asset has been sold.
Repurchase Agreement An agreement of one party to sell securities at a specified price to a second party, and a simultaneous agreement of the first party to repurchase the securities at a specified price or at a specified later date.
Security A generic term for a financial investment representing a share of debt (like a bond) or equity (a share of stock) in an institution. There are different types of investments usually referred to as securities: Agency Securities, issued by an agency of the Federal Government, Treasury Securities, issued by the Federal Government itself (either in short-term T-Bills or longer-term Treasury Bonds), and Mortgage-Backed Securities, which represents a share in the obligations of a group of mortgages.
Treasury Bill A Treasury Bill, or T-Bill, is a short-term investment issued by the Federal Government. T-Bills have maturities under one year (usually one, three, or six months) and do not bear interest by coupon payments, but by discount. That is, the security is bought for less than the face value returned at maturity.
Treasury Bond A Treasury Bond is the longest-term investment issued by the Federal Government. They have maturities between ten and thirty years and pay interest every six months until maturity.
Treasury Notes A Treasury Note is a longer-term investment issued by the Federal Government. They have maturities between one and ten years and pay interest every six months until maturity.
Trust An arrangement where someone (trustee) controls a property or investment portfolio for the benefit of another person or group (beneficiary).
Unrealized Gain/Loss A financial gain or loss caused by an increase or decrease in the current market value of an asset relative to its purchase cost but which has not technically occurred because the asset has not been sold.