Introduction to Finance

Internal growth rate
A measure of how 
quickly a fi rm can increase its asset base over 
the next year without raising outside funds
Internal rate of return (IRR) method
Return 
that causes the net present value to be zero
International banking
When banks operate 
in more than one country
International Fisher eff ect (IFE)
Currency 
of a country with a relatively lower nominal 
interest rate (due to a lower expected infl ation 
rate) will have its currency appreciate relative 
to a country with a relatively higher interest rate
International Monetary Fund (IMF)
Cre-
ated to promote world trade through monitoring 
and maintaining fi xed exchange rates and by 
making loans to countries facing balance of trade 
and payments problems
International monetary system
A 
system 
of institutions and mechanisms to foster inter-
national trade, manage the fl ow of fi nancial 
capital, and determine currency exchange rates
Intrinsic value
The maximum price we 
should be willing to pay for an asset; the best 
estimate of the true economic value of an asset 
based upon a forecast of future cash fl ows and 
an estimate of the appropriate discount rate
Investment bank
Helps businesses sell their 
new debt and equity securities to raise fi nancial 
capital
Investment bankers (underwriters)
Main 
activity is marketing securities and dealing 
with the securities markets
Investment banking fi rms
Sell or market 
new securities issued by businesses to individ-
ual and institutional investors
Investment companies
Sell shares in their 
fi rms to individuals and others and invest the 
pooled proceeds in corporate and government 
securities