ANNUITY: A contract sold by insurance companies that guarantees a stream of payments to a recipient (called the annuitant) in the future, often at retirement. Annuities may be fixed or variable. In a fixed annuity, the payout is made in regular installments varying only with the payout method chosen. In a variable annuity, the total payout will be determined by the value of an investment account.

BOND: A government or corporate IOU, obligating the issuer to pay a specified amount of money in interest at a specified time or times and to repay the principal at a fixed maturity date.

CALL: 1) In options trading, a call is the right to buy a specified number of shares at a specified price by a specified time. 2) In bonds, a call is the right to redeem (pay off) a bond before its maturity date.

COMPUTERIZED PROGRAM TRADING: A computer-run strategy enabling big institutional investors to make lightning-quick trades of huge amounts of stocks, stock index futures and options on index futures in attempts to profit from price disparities. An individual program may control a range of stocks totaling millions of shares, so when several major programs are triggered the moves can cause heavy volume and wild swings in prices.

COUPON: The interest rate the issuer of a debt security promises to pay, expressed as a percentage of the face value of the security.

DIVIDEND: A payment made to shareholders of a corporation from earnings, payable at a fixed rate on preferred shares and at a varying rate, according to the size of profits, on common shares.

FANNIE MAE (FNMA): Nickname for the Federal National Mortgage Association, a federally chartered, privately owned corporation that buys home mortgages from lenders to provide lenders with additional funds to make more loans.

GINNIE MAE (GNMA): The Government National Mortgage Association, a government agency that is part of the Department of Housing and Urban Development. GNMA forms pools of government-insured mortgages and issues securities based on these pools. GNMA insures the timely payment of principal and interest to holders of these mortgage-backed securities, which are known as Ginnie Maes.

JUNK BONDS: High-risk, high-yield debt instruments issued by companies whose credit ratings are not sufficient to allow them to issue investment-grade bonds. In recent years, junk bonds have been widely used to raise cash for corporate takeovers and takeover attempts.

LIMITED PARTNERSHIP: A partnership in which some partners invest money but are not involved in day-to-day management and risk only the amount of their investment. This partnership form conveys certain tax benefits, and is a common method of owning real estate.

MARGIN ACCOUNT: A method enabling an investor to speculate in the market with shares bought with borrowed funds that are backed by collateral such as the investor's stock holdings. Under Federal Reserve regulations, investors may borrow up to 50 percent of the value of a stock purchase. When the value of an investor's collateral falls below the amount of money the investor has borrowed to buy stock, a brokerage firm will make a "margin call" requiring the investor to put up more collateral or face the forced sale of the stock.

MORTGAGE-BACKED SECURITY: A security that represents an interest in a pool of mortgages. Holders of such securities receive a specified share of payments of principal and interest made on the mortgages in the pool.

MUNICIPAL BOND: See tax-exempt bond.

MUTUAL FUND: An organization that invests the money of its shareholders in a diversified group of securities of other corporations. As of Aug. 31, U.S. mutual funds had record assets of $848.4 billion, some $234.3 billion of that in stock funds, according to the Investment Company Institute, a trade group. Bond and income funds had assets totaling $304.9 billion.

OPTION: An agreement, usually for a fee, that permits an investor to buy or sell a stock or a stock index future within a specified time in accordance with the terms of the agreement.

PUT: The right to sell a specified number of shares at a specified price before a specified date.

PORTFOLIO INSURANCE: A strategy in which investors sell options or futures against the underlying stock in a portfolio to offset price drops and enhance price increases.

SHORT SELLING: The practice of selling borrowed securities and delivering them to the buyer, expecting to be able to buy identical shares later at a lower price, to return them to the party they were borrowed from and make a profit.

STOCK: The permanently invested capital of a corporation contributed by the owners when the corporation is organized and divided into shares, each representing ownership in the company. Shares are issued in the form of a stock certificate. Common stock enjoys an exclusive claim to net assets and profits of a corporation if no other class of stock is issued. Preferred stock, when issued, takes precedence over common stock according to specified terms.

STOCK INDEX FUTURES: Contracts that allow investors to buy and sell theoretical packages of stocks for delivery at a future date.

TAX-EXEMPT BOND: A bond whose interest payments are exempt from federal tax and usually from taxes of the jurisdiction in which it was issued. Such bonds are widely referred to as municipal bonds, or simply municipals, even though they are not necessarily issued by municipalities.

TERM LIFE INSURANCE: A form of life insurance, covering a specified period, in which the premiums cover only the cost of the protection. No cash value is built up in the policy, it is as in whole life.

TREASURY BILL, BOND and NOTE: Often referred to collectively as simply Treasuries, these are debt obligations of the U.S. government. They carry the full backing of the government, and are fully negotiable -- that is, they may be bought and sold on the open market. Treasury bills are short-term obligations (one year or less), notes are intermediate-term issues (one to 10 years) and bonds are long-term obligations (10 years or more).

UNIVERSAL LIFE INSURANCE: A form of life insurance that combines the features of term life insurance with a savings component. Savings accumulate tax-deferred.

VARIABLE LIFE INSURANCE: A form of life insurance in which the cash value of the policy is invested in stocks, bonds or money market accounts. As in whole life insurance, the premium remains the same but a portion of it goes to the investment portfolio. The insurance company guarantees a minimum death benefit, but the policyholder bears the risk for the portfolio's performance.

VARIABLE RATE MORTGAGE: A home mortgage whose interest rate varies. Rates on such loans usually are tied to some aspect of the money market, such as Treasury securities or the lender's cost of funds.

WHOLE LIFE INSURANCE: A form of life insurance that provides a death benefit but also builds up a cash value. Whole life policies remain in force for the life of the insured (unless canceled), and the premium remains the same. Cash value accumulates tax-deferred and the policyholder may borrow against it.