Introduction to Finance

Fixed-rate mortgage
Fixed interest rate 
with constant monthly payments over the life 
of the loan, which is typically 15 or 30 years
Flexible exchange rates
A system in which 
currency ex 
change rates are determined by 
supply and demand
Float
The delay between when funds are sent 
by a payer to a payee
Flotation
Initial sale of newly issued debt or 
equity securities
Flotation costs
(1) composed of direct costs, 
the spread, and underpricing; (2) costs of issu-
ing stock; includes accounting, legal, and print-
ing costs of off ering shares to the public as well 
as the commission or fees earned by the invest-
ment bankers who market the new securities to 
investors 
Follow-up stage
Determines, through analy-
sis, if a company is meeting expectations
Foreign exchange markets
Electronic 
mar-
kets in which banks and institutional traders 
buy and sell various currencies on behalf of 
businesses and other clients
Forward contract
Specifi es the currencies 
to be exchanged, an exchange rate, and a future 
date when the transaction will be completed
Forward exchange rate
Negotiated 
exchange 
rate for the purchase or sale of a currency where 
delivery will take place at a future date
Forward rate
Exchange rate specifi ed in the 
forward contract
Fourth market
A market in which large 
institutional investors arrange the purchase and 
sale of securities among themselves without 
the benefi t of broker or dealer
Fractional reserve system
A system in 
which banks are required by the Fed to hold 
reserves equal to a specifi ed percentage of 
their deposits
Full-bodied money
Coins that contain the 
same value in metal as their face value