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Glossary
I-J-K Glossary of Terms Stocks/Options/Fixed Income
| in-the-money |
| A call option is in-the-money if the strike price is below the current market price of the underlying security. A put option is in-the-money if the strike price is above the current market price of the underlying security. The intrinsic value of an option is the amount by which it is said to be in-the-money. |
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| income bonds |
| Bonds that promise to repay principal but to pay interest only when earned. In some cases the unpaid interest on an income bond may accumulate as a claim against the corporation when the bond becomes due. |
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| indenture |
| A written agreement under which bonds and debentures are issued, setting forth maturity date, interest rate, and other terms. |
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| individual retirement account (IRA) |
| An individual pension fund that anyone may open with a bank. An IRA permits investment of contributed funds through intermediaries like mutual funds, insurance companies, and banks or directly in stocks and bonds through stockbrokers. Because it is intended for retirement, money in an IRA enjoys many tax advantages over traditional investments, but may not be withdrawn early without heavy penalty fees |
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| initial public offering (IPO) |
| An issue of new stock by a once private company to transform itself into a publicly held one. IPOs are usually done to raise cash for growing young companies that need larger sources of capital than the private sector can provide. The new shares are sold to one or more investment banks, which then sell them to the public. |
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| investment bank |
| Also known as underwriters, investment banks serve as middlemen between corporations issuing new securities and the buying public. Normally one or more investment banks buy the new issue of securities from the issuing company for a negotiated price. The company walks away with this new supply of capital, while the investment banks form a syndicate and resell the issue to their customer base and the investing public. Investment banks perform a variety of other financial services, such as merger and acquisition advice and market analysis. |
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| investment banker |
| One whose principal business consists of acting as investment adviser and rendering investment supervisory services |
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| investment grade |
| A bond with a Standard & Poor’s rating of BBB- or above, or a Moody’s rating of Baa3 or above. |
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| Issuer |
| A corporation, government, or other authority, that borrows money through the sale of bonds or notes |
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| junk bond |
| Another designation for a high-yield bond. |
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| Keogh Plan |
| Tax advantaged personal retirement program that can be established by a self-employed individual. |
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