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San Leandro Investment Policy StatementPage 14of 15 M AKE W HOLE C ALL. A type of call provision on a bond that allows the issuer to pay off the remaining debtearly. Unlike a call option, with a make whole call provision, the issuer makes a lump sum payment that equals the net present value (NPV) of future coupon payments that will not be paid because of the call. With this type of call, an investor is compensated, or "made whole." M ARGIN. The difference between the market value of a security and the loan a broker makes using that security as collateral. M ARKET R ISK. The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates. M ARKET V ALUE. The price at which a security can be traded. M ARKING TO M ARKET. The process of posting current market values for securities in a portfolio. M ATURITY. The final date upon which the principal of a security becomes due and payable. M EDIUM T ERM N OTES. Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences. M ODIFIED D URATION. The percent change in price for a 100 basis point change in yields. Modified duration is the best M ONEY M ARKET. The market in which short-term debt instruments (T-bills, discount notes, M ORTGAGE P ASS-T HROUGH S ECURITIES. A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security. M UNICIPAL S ECURITIES. Securities issued by state and local agencies to finance capital and operating expenses. M UTUAL F UND. An entity which pools the funds of investors and invests those funds in a set of in various types of domestic and/or international stocks, bonds, and money market investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio. N ATIONALLY R ECOGNIZED S TATISTICAL R ATING O RGANIZATION (NRSRO). A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moody's. N EGOTIABLE CD. A short-term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state-licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor). P REMIUM. The difference between the par value of a bond and the cost of the bond, when the cost is above par. P REPAYMENT S PEED. A measure of how quickly principal is repaid to investors in mortgage securities. P REPAYMENT W INDOW. The time period over which principal repayments will be received on mortgage securities at a specified prepayment speed. P RIMARY D EALER. A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S. Government securities market. P RUDENT P ERSON (P RUDENT I NVESTOR) R ULE. A standard of responsibility which applies to shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with li