Business / Finance Glossary

Interest Rate Risk: The chance that a security's value will change due to a change in interest rates. For example, a bond's price drops as interest rates rise. For a depository institution, also called funding . . . View Full Definition

Interest Rate Swap: A binding agreement between counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one part . . . View Full Definition

Interest Subsidy: The value of a firm's deduction of the interest payments on its debt from its earnings before calculation of its tax bill under current tax law.

Interest Tax Shield: The reduction in income taxes that results from the tax-deductibility of interest payments.

Interest-Only Loan: A loan in which payment of principal is deferred and interest payments are the only current obligation.

Interest-Only Strip (IO): A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments sto . . . View Full Definition

Interest-Sensitive Insurance Policy: A cash value life insurance policy whose insurance dividend rates vary with respect to inflation, enabling the policyholder to avoid the loss of purchasing power associated with inflation.

Interest-Sensitive Stock: Stocks whose earnings are dependent upon and change with the interest rate, e.g., bank stocks.

Interim Dividend: The declaration and payment of a dividend prior to annual earnings determination.

Interim Financing: A short-term loan made to a company on the condition that a takeout will follow with long-term or intermediate financing.

Interim Statement: A financial statement that reflects only a limited period of a company's financial statement, not the entire fiscal year.

Interlocking Directorate: Describes cross-memberships of directors on each other's company Board of Directors.

Intermarket Sector Spread: The spread between the interest rate offered in two sectors of the bond market for issues of the same maturity.

Intermarket Spread Swaps: An exchange of one bond for another based on the manager's projection of a realignment of spreads between sectors of the bond market.

Intermarket Surveillance Information System (ISIS): A database that distributes information from all the major stock exchanges in the United States.

Intermarket Trading System (ITS): Electronic communications network linking the trading floors of seven registered exchanges to permit trading among them in stocks listed on either the NYSE or AMEX and one or more regional e . . . View Full Definition

Intermediate-Term: Typically one-ten years.

Intermediation: Investment through a financial institution. Related: Disintermediation.

Internal Auditor: An employee of a company who analyzes the company's accounting records to that the company is following and complying with all regulations.

Internal Expansion: Growth of assets resulting from internal financing or internally generated cash flow.

Internal Finance: Finance generated within a firm by retained earnings and depreciation.

Internal Growth Rate: Maximum rate a firm can expand without outside sources of funding. Growth generated by cash flows retained by company.

Internal Market: The mechanisms for issuing and trading securities within a nation, including its domestic market and foreign market. Compare: External market.

Internal Measure: The number of days that a firm can finance operations without additional cash income.

Internal Rate Of Return (IRR): Dollar-weighted rate of return. Discount rate at which net present value (NPV) investment is zero. The rate at which a bond's future cash flows, discounted back to today, equal its price.

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