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Back-to-Back Letters of Credit - Two letters of credit with identical documentary requirements, except for a difference in the price of the merchandise as detailed on the invoice and draft.
Balance of Payments - A statement that indicates a country's foreign economic transactions over a defined period.
Balance of Trade - A country's total imports less total exports over a specified period. A "favorable" balance of trade results from exports exceeding imports.
Balanced Mutual Fund - A fund that buys common stock, preferred stock and bonds.
Balloon Loan - A loan with periodic installments of principal and interest that do not fully amortize the loan. The balance of the loan is due in a lump sum at a specified date in the future, usually at the end of the term.
Banker's Acceptances - A time or sight draft drawn on a commercial bank by a borrower, usually in connection with a commercial transaction. The borrower is liable, as is the bank as the primary obligor, to pay the draft at its face amount on the maturity date.
Bankruptcy - A proceeding in a federal court in which the court permits a debtor, whose liabilities exceed his/her assets to be discharged from personal liability for his or her debts.
Bankruptcy Risk - The risk that a party which owes a lender money will become bankrupt.
Basic Earnings - Net income divided by shares outstanding.
Basis Point - One one-hundreth of one percent. The smallest measure used for quoting yields in a bond market. One basis point is 0.01 percent of a bond's yield. Basis points also are used for quoting differences in interest rates. An interest rate of 5 percent is 50 basis points greater than an interest rate of 4.5 percent.
Bear Market - A securities market characterized by declining prices.
Bellwether Stock - The stock of a company recognized as a leader in its industry. For example, IBM is considered a bellwether stock in the computer field.
Benchmarking - Comparing information of one entity to like information of another entity to determine areas for potential improvement and to identify the best practices.
Beneficiary - A person or institution eligible to receive benefits from a trust. Benefits may be payable currently or at some future time.
Beneficiary Deduction - A fee deducted by the beneficiary bank from a payment being made to a third party beneficiary. The cost is based on country practices.
Beta - Measures the volatility of a share of stock. A high beta stock, for example, will rise more in value than the stock market average on a day when shares in general are rising. In addition, it will fall more sharply than the stock market average on a day when shares are falling. The Standard & Poor's 500 Index of stocks, an index that represents large-company stocks, has a beta of 1.
Bid - The quoted bid, or the highest price an investor is willing to pay to buy a security. The term may also refer to the price at which an investor can sell shares of stock.
Bill of Exchange - Also referred to as a "draft," an unconditional order written by a party (drawer) to another party (drawee) directing the drawee to pay a certain sum at a fixed or determinable date, payable to a named party.
Biweekly Mortgage Loan - A mortgage loan with payments due every two weeks, totaling 26 payments a year.
Blanket Mortgage - A lien on more than one parcel or unit of land frequently incurred by subdividers or developers who have purchased a single tract of land for the purpose of dividing it into smaller parcels for sale or development.
Bond - A debt issued for a period of more than one year. The U.S. government, local governments, water districts, and many other types of institutions sell bonds. When an investor buys bonds, he or she is, in effect, lending money. The seller of the bond agrees to repay the principal amount of the loan to the bond holders at a specified time. Interest-bearing bonds pay interest on a periodic basis.
Book Value - A company's total assets minus intangible assets and liabilities. A company's book value might be more or less than the market value of the company.
Breadth - An assessment of how broadly a market is moving. For example, when three-quarters of the stocks on the New York Stock Exchange rise during a given day, an observer might say the stock market had good breadth. Often, observers will measure the number of stocks advancing against the number declining as one way of monitoring breadth.
Bridge Financing - A loan spanning the gap between the termination of one loan (generally short-term) and the start of another (generally permanent long-term) loan. Also referred to as gap financing.
Bridge Loan - A form of mortgage loan that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the loan proceeds to be used for closing on a new house before the present home is sold.
Bull Market - A securities market characterized by rising prices.
Business Continuation Plan - An arrangement between business owners that provides for the shares owned by any one of them who dies to be sold to and purchased by the other co-owners or by the business.
Buy-Sell Agreement - An agreement which provides that a deceased business owner's interest will be sold and purchased at a predetermined price or at a price according to a predefined formula.
Buydown - Money advanced by an individual (builder, seller, etc.) to reduce the monthly payments for a home mortgage loan, either during the entire term or for an initial period of years.