An I Bond is one of two types of savings bonds sold by the U.S. Treasury (the other is the EE Bond). The U.S. Treasury has issued many different series of savings bonds over the years, but ...

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An Icahn Lift is a rise in stock price associated with an investment by famed activist shareholder Carl Icahn. Carl Icahn was a corporate "raider" in the 1980s and made millions buying and sel...

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In business, the Icarus factor describes what happens when companies become overly dedicated or overly enthusiastic about a project or initiative, and that enthusiasm and dedication becomes a detrimen...

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An iceberg order is a large order that has been split into several smaller orders to conceal the "real" size of the order. Let's assume Company XYZ is a $50 billion pension fund. It often ...

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Ideation is the act of forming ideas. For example, let's say Company XYZ makes widgets, and it wants to get into the children's widget market. Its product development team starts brainstorm...

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An identifiable asset is anything that has commercial or exchange value and can provide future economic benefits. Identifiable assets can be tangible or intangible. Let’s assume XYZ Company int...

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An identity fraud reimbursement program is an insurance-like product that reimburses the holder for expenses related to dealing with being a victim of identity theft. Let's say John Doe happens to se...

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Identity theft is the crime of using another person's personal information, credit history or other identifying characteristics in order to make purchases or borrow money without that person's permiss...

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Also called unsystematic risk, idiosyncratic risk is price risk associated with a company's particular circumstances. For example, price changes can occur in Company XYZ stock for several reasons....

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Idle funds are monies that are not invested. Money, like people, must work in order to earn money. And just as when people do not work, when money is not invested, it is not earning money. ...

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Also called down time, idle time is when employees or machines are not working but are being paid. Let's say Company XYZ manufactures autos. The machine that installs windshields breaks, which hol...

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The Ifo Business Climate Survey is a monthly measure of German business activity. The Ifo Business Climate Survey incorporates over 5,000 monthly survey responses from a variety of companies. The sur...

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An illegal dividend is a dividend declared in violation of a company's charter or state laws.   For example, let's say Company XYZ has $20,000,000 of retained earnings. It recently rai...

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Illiquid describes an asset or security that cannot be sold quickly due to a shortage of interested buyers or a lack of an established trading market. Illiquid assets cannot be easily converted into c...

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Immediate payment annuities (also called single-premium immediate annuities or SPIAs) are annuities that begin making payments to the owner immediately (within one year of purchase). An annuity is a ...

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Immunization is a dedicated-portfolio strategy used to manage a portfolio with the goal of making it worth a specific amount at a certain point, usually to fund a future liability. Immunization i...

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An impact day is the day on which a company's secondary offering begins trading. Let's say Company XYZ is a public company and would like to sell additional shares in order to raise money to ...

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Real estate developers pay an impact fee to cities or other municipalities to offset the town's cost of building the infrastructure to support a private real estate development. Let's say Com...

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Generally, an impaired asset is an asset whose market value is below book value. Generally, an asset impairment occurs when a company (1) pays more than book value for a set of assets and (2) later lo...

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The term impairment refers to assets that are no longer of the same value as in a prior period. An impairment charge is used and the asset is revalued downward and a "charge" is made to net as...

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An implementation lag is the time elapsed between an adverse macroeconomic shock and an effort to counter the shock. Let's say the United States experiences a huge increase in unemployment and hu...

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An implied warranty is an unwritten guarantee that a product or service works as expected. An implied warranty is a lot like an assumption. For example, when you buy a new car from a car dealer, the ...

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In the tax and import/export world, an import duty (or customs duty) is money collected under a tariff. A duty is a federal tax on imports (or exports). For example, Americans who travel abroad can b...

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In the real estate world, an impound is an account that mortgage companies use to collect property taxes, homeowners insurance, private mortgage insurance and other payments that are required by the h...

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Imputed Interest refers to interest that is considered by the IRS to have been paid for tax purposes, even if no interest payment was made. The IRS uses imputed interest as a tool to collect tax reven...

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A stock is in play when it is widely believed to be a takeover target. Let's say Company XYZ has a ton of cash on its balance sheet, and activist investors have been pressuring it for nine months...

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In specie is a Latin term describing the provision of an asset in its physical form rather than in the cash value of the asset. Let's say Company XYZ wants to purchase Company ABC for $10 million. Co...

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Securities are held in street name when the name of the broker, not the individual owner, is listed on the certificate. Almost all securities held in brokerage accounts are held in street name.Even if...

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An inactivity fee is a fee charged by brokerages to clients whose infrequent trading does not satisfy a minimum trading requirement.A brokerage house earns revenue from fees and commissions charged on...

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An Incentive share option, or ISO, is a type of company share option granted exclusively to employees.  It confers an income tax benefit when exercised. ISOs are also referred to as "incentiv...

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Incentive stock option (ISO) is a type of company stock option granted exclusively to employees. It gives the employee the right, but not the obligation, to purchase shares of a company, usually t...

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Inchoate is a legal term indicating that a transaction or activity has been discussed or even agreed upon but is not final or is still incomplete. Let's say Company XYZ wants to buy Company ABC. ...

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Income is an actual or recorded inflow of cash or other assets. The term is used in many different contexts. Let's say John Doe works for Company XYZ. His salary is $100,000 per year. This ...

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An income deposit security (IDS), also known as an "enhanced income security," is an exchange-traded security composed of both an issuer's common shares and its subordinated notes. An IDS is a hybrid...

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Income elasticity of demand is a measure of how much demand for a good/service changes relative to a change in income, with all other factors remaining the same. The formula for income elasticity is:...

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Income from operations is income that is generated by the normal operations of a business. Income from operations is also referred to as operating income or operating e...

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Income funds are mutual funds, ETFs or any other type of fund that seek to generate an income stream for shareholders by investing in securities that offer dividends or interest payments. The funds ca...

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An income statement is a financial statement detailing a company’s revenue, expenses, gains, and losses for a specific period of time that is submitted to the Securities and Exchange Commission ...

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An income stock is a stock in which a taxable payment is declared by a company's board of directors and is given to the shareholders from the current or retained earnings that occur, usually ...

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Income tax refers to taxes imposed by the government on individuals and businesses based on annual income. In the US, income tax is collected on taxable income by the Internal Revenue Service (IRS). ...

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An income-oriented ETF is an exchange-traded fund that pays frequent dividends or interest payments to investors in the ETF.An income-oriented ETF is made up of stocks that typically pay substantial m...

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Incorporation means to form a corporation. A corporation is a legal form of business organization. It is sometimes referred to as a "C Corp" in reference to a section of the IRS code governing cor...

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An indenture agreement is the formal contract between a bond issuer and the bondholders. It sets forth the details of all the terms and conditions of the bonds, such as the exact day of their maturity...

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An index is a statistical aggregate that measures change. In finance, they usually refer to measures of stock market performance or economic performance. Let's say we want to measure the stock price ...

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An index annuity is an annuity that pays a rate of return corresponding to a particular index, such as the S&P 500 Index. An annuity is a contract whereby an investor makes a lump-sum payment to ...

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Like other ETFs, an index ETF is essentially a passive mutual fund -- similar to traditional index funds -- that allows investors to purchase a basket of securities in a single transaction. An index E...

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Index funds are mutual funds that are designed to track the performance of a particular index. When an investor purchases a share of an index fund, he or she is purchasing a share of a portfolio that...

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An index hugger is a type of mutual fund whose performance closely tracks a major stock index.An index hugger is also referred to as a closet tracker.An index hugger is an actively-managed fund whose ...

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Introduced in 1981, index options are call or put options on a financial index comprising many stocks.  Index options usually have a contract multiplier of $100, meaning that the price...

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An indexed annuity is an annuity that pays a rate of return corresponding to a particular index, such as the S&P 500 Index. An annuity is a contract whereby an investor makes a lump-sum payment to...

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An indexed certificate of deposit (sometimes called a market-linked, equity-linked, or market-indexed CD) is a type of CD that’s based on either a market index, a basket of equities, or a combinatio...

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Indexing is a passive investment strategy that seeks to mimic or exceed the returns of a designated market index or other proxy. The strategy requires an investor to first choose an index to mimic. Th...

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Indicated yield is the dividend yield on a stock if the most recent dividend is annualized.The formula for indicated yield is:  Indicated Yield = (Most Recent Dividend x Number of Dividend Pay...

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The individual mandate refers to Section 5000A of the Patient Protection and Affordable Care Act (PPACA), also known as "Obamacare" or the more generic "health care reform." PPACA is a...

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An Individual Retirement Account (IRA) is a government sponsored, tax-deferred personal retirement plan.  An IRA can also be referred to as a Traditional IRA. In order to open an IRA, an indi...

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In economic terms, an inefficient market is a market in which securities prices are random and not influenced by past events. The idea is also referred to as weak form efficient-market hypothesis or t...

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Something is inelastic when its price does not vary with the price of another item. It the business world, the term most often refers to how little the price of a good or service changes when the supp...

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Infant Industry Theory promotes an economic policy that protects young industries in less developed economies until they become established, financially stronger, and capable of withstanding competiti...

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An inferior good is a product for which demand goes down as income goes up.As opposed to demand for "normal goods," which goes up as income increases, demand for inferior goods goes down as income inc...

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Inflation is the rate at which prices rise and purchasing power falls. It is why something that cost $1 in 1980 cost $2.37 in 2005. Two general theories explain inflation. The first, the demand-pull ...

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Inflation risk, also called purchasing power risk, is the chance that the cash flows from an investment won't be worth as much in the future because of changes in purchasing power due to inflation...

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Inflation eats away at the value of every stream of cash flows, including salaries, pension payments and coupon payments. In many cases, the real interest rates on savings accounts are negative. For i...

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Inflation-indexed securities are a form of savings that protects the principal and interest from the erosion of inflation.One of the most significant economic threats to anyone living on a fixed incom...

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The Federal Reserve Bank of New York provides, among other things, gold storage for foreign governments and central banks. This gold is in the form of bars, which allows the bank to weigh it, stack it...

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An inheritance includes those assets of an estate that are bequeathed, in whole or in part, to specific heirs.The assets that comprise an estate are customarily transferred to individuals specified by...

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An inheritance tax, also called an estate tax, is a tax assessed on all or a portion of an inherited estate. Life insurance, pensions, real estate, cars, belongings and debts are all part of ...

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Initial Jobless Claims is a report issued by the U.S. Department of Labor every Thursday at 8:30am EST.  The data in the Initial Jobless Claims report reflect how many people filed for...

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An initial margin, or initial margin requirement, is the amount an investor must pay in cash for securities before the broker will lend money to that investor to buy more securities. This borrowi...

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An initial public offering (IPO) refers to the first time a company publicly sells shares of its stock on the open market. It is also known as "going public."The proceeds from the sale of...

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Injunctions are an alternative to monetary judgments, in which the court might order a party to pay damages to another party. In some cases, they are much better for defendants to deal with; in Jane&#...

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An insider is an employee, director or any other person who is privy to confidential, nonpublic information about a company. Given their position, managers and executives within a company are privy to...

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Insider information refers to confidential information about a company that has not been publicly disclosed.Given their position, managers and executives within a company are privy to information abou...

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Insider trading refers to the trading of securities by corporate insiders such as managers or executives. Insider trading can be legal or illegal depending on if the information used to base the ...

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In most usages, insolvency is the inability of a company or individual to meet its financial obligations as they come due. In the legal sense of the word, an entity is considered insolvent if its tota...

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Installment debt refers to any loan that is repaid by the borrower in periodic (usually monthly) installments that include principal and interest.Installment debt, also called an installment loan, is ...

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An installment loan is a type of loan that is repaid in periodic installments (usually monthly payments) that include principal and interest. An installment loan can also be referred to as installmen...

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The Institute for Supply Management (ISM) is a professional association for individuals and companies with an interest in supply management. The ISM publishes two important monthly surveys, the Manuf...

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An institutional investor is an organization, rather than an individual, that invests on behalf of the organization's members. Institutional investors are the biggest component of the so-call...

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Institutional ownership refers to the ownership stake in a company that is held by large financial organizations, pension funds or endowments. Institutions generally purchase large blocks of a company...

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Also called Y shares, institutional shares are mutual fund shares that are available for sale only to institutions. Let's say that the XYZ Mutual Fund invests in a variety of defensive stoc...

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An insurance premium is the price a person or business (the insured) pays for an insurance policy. Insurance premiums are paid for all types of insurance: healthcare, rental, accident, auto, home, lif...

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An insurance score is a number generated by insurance companies based on your credit score and claim history to determine the probability that a policyholder will file a claim in the future. There ar...

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Insurance underwriters are professionals who assess and investigate the risks involved in insuring people and assets. Insurance underwriters typically work for an insurance company. They establish ...

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An intangible asset is an asset that lacks a physical substance.  For example, goodwill, patents, trademarks and copyrights are intangible assets. None of these assets can be phys...

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LIBOR is one of the most widely used benchmarks for short-term interest rates and is unlike the prime rate in the United States, which is somewhat arbitrarily based on certain banks' lending costs...

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An interchange is an electronic transfer of information. In the business world, this usually involves financial data. Banks are common users of interchange data because they issue credit ca...

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The term interchange fees, also known as swipe fees, refers to the hidden cost paid by merchants to card-issuing banks and credit card companies for processing credit card and debit card transactions....

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An interchange rate is a bank fee for executing credit card and debit card transactions. An interchange is an electronic transfer of information. In the business world, this usually involve...

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Interest is the cost of borrowing money for a certain period of time. Let's assume you need $500,000 to buy a house. The "price" of borrowing that money is interest, and it is expressed as ...

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The interest coverage ratio, also known as times interest earned, is a measure of how well a company can meet its interest-payment obligations. The interest coverage ratio is also referred ...

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Interest expense is the cost of money. Interest expense is recorded on the income statement. Let's assume you need $500,000 to buy a house. The "price" of borrowing that money is interest, ...

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Interest Only Strips (IO Strips) are securities with cash flows based entirely on the monthly payments received from a mortgage pool.Mortgages are paid in two parts, principal and interest. The total ...

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An interest rate is the cost of borrowing money, or conversely, the income earned from lending money. Interest rates are expressed as percentage of the principal per period.The formula to find an inte...

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The term interest rate ceiling typically refers to the maximum lifetime interest rate charged on an adjustable rate mortgage according to the terms of a mortgage contract. A potential homebuyer contr...

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Interest rate risk is the chance that an unexpected change in interest rates will negatively affect the value of an investment.Let's assume you purchase a bond from Company XYZ. Because bond price...

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An interest rate swap is a financial contract between two parties (such as companies or investors) that want to exchange interest rates. These could be interest rates they’re paying on loans or ...

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An interest-only adjustable-rate mortgage (interest-only ARM) is a mortgage in which the borrower only pays the interest on the loan for a set period. There are two parts to an interest-only ARM that...

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An interest-only mortgage is a mortgage in which the borrower only pays the interest on the loan for a set period. In general, an interest-only mortgage means the borrower only pays the interest on t...

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An interim CEO is a temporary chief executive officer. A CEO oversees the entire operation of a company or organization. In some organizations, the CEO is called the president, the executiv...

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Internal controls are the methods and processes through which a company ensures that the organization is adhering to important policies and obligations. A company's board of directors, management ...

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Internal rate of return (IRR) is the discount rate that makes the net present value of all cash flows (both positive and negative) equal to zero for a specific project or investment.  What...

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The Internal Revenue Service (IRS) is a bureau of the Department of Treasury that is tasked with the enforcement of income tax laws and oversees the collection of federal income taxes. In addition, it...

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An international banking facility (IBF) is a segregated branch of a domestic bank or financial institution available to only foreign customers.International banking facilities provide a range of ...

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International bonds are debt securities issued by foreign companies or governments and sold domestically.Foreign companies or governments may issue bonds that are securitized and sold to domestic inve...

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International bond funds invest in bonds issued by foreign governments or foreign companies in a variety of markets, industries, and currencies. They allow investors to have an easy way to gain a dive...

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An international currency exchange rate is the rate at which one currency converts to another. For example, if the international currency exchange rate for one U.S. dollar to one Canadian dollar is 0...

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International fund usually refers to an investment or mutual fund composed of international bonds and foreign company stocks.A number of the largest families of mutual funds include international fund...

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The International Monetary Fund (IMF) is the central institution embodying the international monetary system and promotes balanced expansion of world trade, reduced trade restrictions, stable exchange...

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An international securities identification number (ISIN) is a universally accepted identifier exclusive to a particular issue of a security. Every legitimate market-traded security issued worldw...

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Intestate means dying without a will. For example, let’s assume that John Doe dies without a will. He has a sister and a brother, but no wife or children. Because John died intestate, ...

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Intraday refers to price movements of a given security over the course of one day of trading.  It is generally used to describe the high and low price of a stock or option during a given trad...

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Intrinsic value has two primary connotations in the finance world. In the options-trading world, the term refers to the difference between the option's strike price and the market value of the und...

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Anyone who has ever worked in retail has heard the term inventory. For businesses, inventory is not only how stores keep customers happy, but it’s also how they keep supply chains moving (and en...

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Inventory management is the process of ensuring that a company always has the products it needs on hand and that it keeps costs as low as possible. Inventories are company assets that are intended fo...

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An inventory reserve is an accounting entry that reflects a reduction in the market value of a company's inventory. For example, let's say that Company XYZ bought 1,000,000 widgets for $4 eac...

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The inventory turnover ratio measures the rate at which a company purchases and resells products to customers. There are two formulas for inventory turnover:        ...

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An inverted yield curve, also called a negative yield curve, is a yield curve indicating that short-term yields are higher than long-term yields. Also known as the term structure of interes...

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An investment is an asset that is intended to produce income or capital gains.  Investing is the act of using currently-held money to buy assets in the hopes of appreciation. Investing is ...

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An investment is an asset intended to produce income or capital gains. Investments can be stocks, bonds, mutual funds, interest-bearing accounts, land, derivatives, real estate, artwork, old comic bo...

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An investment advisor makes investment recommendations to clients and can also be known as a financial advisor. A investment advisor is similar to a financial planner, investment manager, investment ...

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An investment bank is a financial intermediary that specializes primarily in selling securities and underwriting the issuance of new equity shares to raise capital funds. This is different from a comm...

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The role of an investment banker is to serve as a middle-man between prospective investors and companies that intend to raise capital through the issuance of new stock. Investment bankers are often em...

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Investment banking is a category of financial services that specializes primarily in selling securities and underwriting the issuance of new equity shares to help companies raise capital. Investment b...

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Joining an investment club is an excellent way to learn more about investing, and it is not unusual for investment clubs to experience outstanding returns. It is important that members of investmen...

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An investment consultant is an educated investment professional who helps people and businesses set and meet long-term financial goals. An investment consultant is similar to an investment advisor, fi...

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Investment grade is a quality designation ascribed by rating agencies to bonds that have little risk of default.Municipal and corporate bonds are rated by credit agencies, such as Standard & Poor&...

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Investment management has two general definitions, one relating to advisory services and the other relating to corporate finance. In the first instance, a financial advisor or financial services c...

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An investment manager is an educated investment professional who helps people and businesses set and meet long-term financial goals. A investment manager is similar to an investment advisor, financial...

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An investment property is a real estate investment purchased with the intent of earning a return on the money used to purchase the property. The return on the investment can be earned through rental i...

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Investment real estate refers to any residential structure owned solely for the purpose of generating investment returns, either through rental income or through market value appreciation. Often, an ...

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An investor is any person or entity, like a firm or mutual fund, who commits capital with the expectation of receiving financial returns. Individuals use investments in order to increase their ...

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Investor relations (IR) refers to the function within a public company that is responsible for managing and communicating information to the public pertaining to the company's operations, manageri...

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In The Theory of Moral Sentiments, Adam Smith theorized that as every individual intends to seek out his own gains, he is “led by an invisible hand to promote an end which was no part of his intenti...

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The term IOU is the phonetic spelling of the phrase "I Owe You." In bookkeeping, it signifies an outstanding debt. Usually, an IOU is a signed informal notice of an unpaid debt, sometimes b...

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IPO Lockup refers to the period of time after a company initially goes public during which company insiders are not allowed to sell company shares.In an initial public offering (IPO) often receive sto...

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The phrase irrational exuberance was coined by Alan Greenspan, chairman of the Federal Reserve, in a December 5, 1996, speech to the American Enterprise Institute. In the speech, Greenspan asked,...

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The IRS Form 1099 is used to report a variety of unique income payments to the IRS. This form is usually used when the taxpayer has received income from other sources besides a wage-paying job.There a...

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Created by Barclays Global Investors, iShares are a trademarked brand of exchange-traded funds (ETFs). Exchange-traded funds (ETFs) are securities that closely resemble index funds but can be bought ...

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Issued shares include all shares that are currently owned by stockholders, company officials, and investors in the public domain. Issued shares do not include shares repurchased by a company.Issued sh...

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Issuer refers to a legal entity -- i.e., government, corporation, or investment trust -- that develops, registers and sells securities to the investing public in order to finance its operatio...

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An itemized deduction is a reduction in taxable income that is dependent on calculations specific to the taxpayer's expenses or situation. Federal, state and local tax codes determine what is dedu...

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An itemized statement is a detailed record of certain activity that has occurred in an account for a given period of time. Monthly bank statements for common checking accounts often are itemized stat...

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