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Definition of Investment bank
Financial intermediaries who perform a variety of services, including aiding in the sale of
Middleman between a corporation issuing new securities and the public. The middleman buys the securities issue outright and then resells it to customers. Also called an underwriter.
Communication barrier between financiers (investment bankers) and traders. This barrier is
An undewriting in which an investment banking firm commits to buy the
The commercial or investment bank with the primary responsibility for organizing syndicated
A party that guarantees the proceeds to the firm from a security sale, thereby in effect taking
A group of investment banks that work together to sell new security offerings to
See investment banker.
A financial institution that engages in investment banking functions, such as advising clients in mergers and acquisitions, underwriting securities and taking debt or equity positions.
A form of organization commonly used by foreign banks to enter the U.S. market. An agency
Notes issued by states and municipalities to obtain interim financing for
The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.
A convention used for quoting bids and offers for treasury bills in terms of annualized
A draft addressed to a bank.
Line of credit granted by a bank to a customer.
A computer message system linking major banks. It is used not for effecting payments, but as a
A short-term credit investment created by a non-financial firm and guaranteed by a
Bank for International Settlements (BIS)
An international bank headquartered in Basel, Switzerland, which
State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
Bankruptcy cost view
The argument that expected indirect and direct bankruptcy costs offset the other
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
The argument that expected bankruptcy costs preclude firms from being financed entirely
Clearing House Interbank Payments System (CHIPS)
An international wire transfer system for high-value
A merchant banking subsidiary set up by several banks that may or may not be of the
Dividend reinvestment plan (DRP)
Automatic reinvestment of shareholder dividends in more shares of a
Eligible bankers' acceptances
In the BA market, an acceptance may be referred to as eligible because it is
A bank that regularly accepts foreign currency denominated deposits and makes foreign currency loans.
Expected return on investment
The return one can expect to earn on an investment. See: capital asset
Export-Import Bank (Ex-Im Bank)
The U.S. federal government agency that extends trade credits to U.S.
Federal Financing Bank
A federal institution that lends to a wide array of federal credit agencies funds it
Federal Home Loan Banks
The institutions that regulate and lend to savings and loan associations. The
Foreign banking market
That portion of domestic bank loans supplied to foreigners for use abroad.
Foreign direct investment (FDI)
The acquisition abroad of physical assets such as plant and equipment, with
Future investment opportunities
The options to identify additional, more valuable investment opportunities
Guaranteed investment contract (GIC)
A pure investment product in which a life company agrees, for a
International Bank for Reconstruction and Development - IBRD or World Bank
International bank for Reconstruction and Development makes loans at nearly conventional terms to countries for projects of high
International Banking Facility (IBF)
International banking Facility. A branch that an American bank
Related: financial analysts
Decisions concerning the asset side of a firm's balance sheet, such as the decision to
Investment grade bonds
A bond that is assigned a rating in the top four categories by commercial credit
The revenue from a portfolio of invested assets.
Also called a portfolio manager and money manager, the individual who manages a
Investment product line (IPML)
The line of required returns for investment projects as a function of beta
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
A closed-end fund regulated by the investment Company Act of 1940. These funds have a
As a discipline, the study of financial securities, such as stocks and bonds, from the investor's
A legal proceeding for liquidating or reorganizing a business.
investments that a regulated entity is permitted to make under the rules and regulations
A British term for a bank that specializes not in lending out its own funds, but in providing
Money center banks
banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.
Mutually exclusive investment decisions
investment decisions in which the acceptance of a project
Gross, or total, investment minus depreciation.
Net present value of future investments
The present value of the total sum of NPVs expected to result from
Passive investment strategy
See: passive management.
Passive investment management
Buying a well-diversified portfolio to represent a broad-based market
PIBOR (Paris Interbank Offer Rate)
The deposit rate on interbank transactions in the Eurocurrency market
A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
The rate at which an investor assumes interest payments made on a debt security can be
The risk that proceeds received in the future will have to be reinvested at a lower potential
REIT (real estate investment trust)
Real estate investment trust, which is similar to a closed-end mutual
REMIC (real estate mortgage investment conduit)
A pass-through tax entity that can hold mortgages
Return on investment (ROI)
Generally, book income as a proportion of net book value.
Short-term investment services
Services that assist firms in making short-term investments.
Society for Worldwide Interbank Financial Telecommunications (SWIFT)
A dedicated computer network to support funds transfer messages internationally between over 900 member banks worldwide.
The mirror image of the asset substitution problem, wherein stockholders refuse
Unit investment trust
Money invested in a portfolio whose composition is fixed for the life of the fund.
Wholesale mortgage banking
The purchasing of loans originated by others, with the servicing rights
A multilateral development finance agency created by the 1944 Bretton Woods, New
A portfolio of zero net value established by buying and shorting component
RETURN ON INVESTMENT (ROI)
In its most basic form, the rate of return equals net income divided by the amount of money invested. It can be applied to a particular product or piece of equipment, or to a business as a whole.
Money in a bank cheque account, the difference between receipts and payments.
Money owed to the bank in a cheque account where payments exceed receipts.
A division or unit of an organization that is responsible for achieving an adequate return on
Return on investment (ROI)
The net profit after tax as a percentage of the shareholders’ investment in the business.
The process of taking the balances from the bank statement and the general ledger and making adjustments so that they agree.
capital investment analysis
Refers to various techniques and procedures
return on investment (ROI)
A very general concept that refers to some
The commitment of funds (capital) in anticipation of an increased
a responsibility center in which the manager
a judgment about which assets will be
the process of gathering information
an assumption made about the rates of return that will be earned by intermediate cash flows from a capital project; NPV and PI assume reinvestment at the discount rate; IRR assumes reinvestment at the IRR
return on investment
a ratio that relates income generated
A comparison between the cash position recorded on a company’s
The reorganization or liquidation of a firm that cannot pay its debts.
System whereby customers make payments to a regional collection center which transfers funds to
Bonds rated Baa or above by Moody’s or BBB or above by Standard & Poor’s.
A public agency responsible for regulating and controlling an economy's monetary and financial institutions. It is the sole money-issuing authority.
A privately owned, profit-seeking firm that accepts deposits and makes loans.
Federal Reserve Banks
The twelve district banks in the Federal Reserve System.
Fractional Reserve Banking
A banking system in which banks hold only a fraction of their outstanding deposits in cash or on deposit with the central bank.
Expenditures on capital goods including new housing. Financial ''investments" and sales of existing assets are not included.
Investment Tax Credit
A reduction in taxes offered to firms to induce them to increase investment spending.
investment spending minus depreciation.
The International bank for Reconstruction and Development, an international organization that provides long-term loans to developing countries to improve their infrastructure.
A bill of exchange, or draft, drawn by the borrower for payment on a specified date, and accepted by a chartered bank. Upon acceptance, the bill becomes, in effect, a postdated certified cheque.
Business Expansion Investment
The use of capital to create more money through the addition of fixed assets or through income producing vehicles.
Money used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.
ABM (automated banking machine)
A bank machine, sometimes referred to as an automated teller machine (ATM).
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