tailieunhanh - Dictionary of Finantial and Business Terms part 8

Interest rate parity theorem Interest rate differential between two countries is equal to the difference between the forward foreign exchange rate and the spot rate. Interest rate risk The risk that a security's value changes 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 risk, the risk that spread income will suffer because of a change in interest rates. | 71 Dictionary of Finantial and Business Terms Lico Reis - Consultoria L nguas licoreis@ Interest rate parity theorem Interest rate differential between two countries is equal to the difference between the forward foreign exchange rate and the spot rate. Interest rate risk The risk that a security s value changes 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 risk the risk that spread income will suffer because of a change in interest rates. 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 party will pay fixed and receive variable. Interest subsidy A firm s deduction of the interest payments on its debt from its earnings before it calculates its tax bill under current tax law. Interest tax shield The reduction in income taxes that results from the tax-deductibility of interest payments. 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. Intermediate-term Typically 1-10 years. Intermediation Investment through a financial institution. Related disintermediation. Internal finance Finance generated within a firm by retained earnings and depreciation. Internal growth rate Maximum rate a firm can expand without outside source 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 .