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Face Value:

The stated value, or par value, of a bond certificate when issued and when redeemed at maturity. The face value never changes but the current value does. Current value for a bond is (face value x price) divided by 100. Bonds are purchased as units of face value. For example, an investor buys a $10,000 bond at the current value can be of more or less than $10,000, depending on market conditions.

Fannie Mae:

Nickname for the Federal National Mortgage Association and the mortgage-backed securities it issues.

Far out of the money:

Used to describe an option that is unlikely to go into the money prior to expiration.

Fast Market:

A market condition in which a large number of orders for a particular security are received within a short period of time and faster than the brokers-specialists and market makers can handle effectively. These situations are often created by the announcement of unexpected news and may lead to price volatility.

Federal Call:

When a client makes certain types of transactions in a margin account, the brokerage firm will issue a call notifying the client if additional equity is required by the settlement date in order to satisfy Federal Regulation T.

Federal Reserve Board:

The governing body of the Federal Reserve System. Board actions help shape government monetary policy, most notably interest rates, and the U.S. economy.

Fee,12b-1:

Annual fee, expressed as a percentage of NAV, specifically designated for marketing expenses for a given mutual fund. This fee is included in the expense ratio.

Fences:

See COLLAR.

Fiduciary:

An individual, corporation or association holding assets for another party, often with the legal authority and duty to make decisions regarding financial matters on behalf of and in the best interests of the other party.

Fill-or-kill Order (FOK):

A type of order which requires that the order be executed completely or not at all. A fill-or-kill order is similar to an all-or-none (AON) order. The difference is that if the order cannot be completely executed (i.e., filled in its entirety) as soon as it is announced in the trading crowd, it is to be "killed" (i.e., cancelled) immediately. Unlike an AON order, a FOK order cannot be used as part of a GTC order.

Financing Corporation:

An agency created to assist the S&L industry by retailing securities to the public; also the nickname for its securities.

First Call Date:

First date on which a corporation or municipality may redeem part or all of a callable bond issue at a set price.

First Call Provisions:

Some bonds can be called prior to the maturity date at the issuer's discretion. These bonds are callable. The first call provision describes the time period and the price offered for the first call by the issuer.

Fiscal Policy:

Federal tax and spending policies set by Congress or the President of the United States. These policies directly affect tax rates and regulate government spending in an effort to control the U.S. economy.

Fiscal Year:

Any continuous 12 months, which is used by a business or government as its annual accounting period.

Fiscal Year End:

Shows the last month or day of a corporation's fiscal year.

Fixed Annuity:

Guarantees payments of a known and fixed dollar amount to the annuitant (that is, beneficiary) for the period covered under the contract.

Flexible Mutual Fund:

A mutual fund whose holdings can vary between stocks or bonds, depending on market conditions. Flexible funds seek to take advantage of changing market conditions.

Floater:

A debt instrument, such as a bond, with a variable interest rate tied to another interest rate such as a Treasury Bond.

Floating Rate:

Rather than a fixed interest or coupon rate, some bonds and CDs have a floating interest rate which is adjusted periodically to market conditions. It is also called Variable Rate.

Floor broker:

An exchange member who is eligible to execute orders, as an agent, for customers of a member firm on the floor of an exchange.

Floor trader:

An exchange member on the trading floor who buys and sells for his or her own account.

Fourth Market:

Trades that occur directly between institutional investors on a system named Instinet.

Front-end Load:

The percentage of the purchase price that is charged and deducted from an investment; same as a Sales Charge. For example, if you invest $1000 in a 5% front-end load mutual fund, you only purchase $950 worth of shares.

Full-service broker:

A broker who provides investment research, information, and advice, as well as the services involved in purchasing and selling securities. Full-service brokers usually charge the highest commission rates.

Fundamental analysis:

A method of forecasting stock prices based on the study of earnings, sales, dividends, markets, and a number of other factors.

Fungibility:

Interchangeability resulting from identical characteristics or value. Options with common expiration dates and strike prices standardized by the Options Clearing Corporation (OCC) and a company's common stock are examples of fungible instruments.

Futures Contract:

A standardized, exchange-traded agreement specifying a quantity and price of a particular type of commodity (soybeans, gold, oil) to be purchased or sold at a pre-determined date in the future. On contract date, delivery and physical possession take place unless the contract has been closed out. Futures can be used for speculation or hedging.