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Notes issued by states and municipalities to obtain interim financing for projects that will eventually be
funded long term through the sale of a bond issue.
Bank collection float
The time that elapses between when a check is deposited into a bank account and when the funds are
available to the depositor, during which period the bank is collecting payment from the payers bank.
Bank discount basis
A convention used for quoting bids and offers for Treasury bills in terms of annualized yield, based on a 360-
day year.
Bank draft
A draft addressed to a bank.
Bankers Acceptance
A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment.
Acceptances are traded at discounts to face value in the secondary market. These instruments have been a
popular investment for money market funds. They are commonly used in international transactions.
Bank for International Settlements (BIS)
An international bank headquartered in Basel, Switzerland, which serves as a forum for monetary
cooperation among several European central banks, the Bank of Japan, and the U.S. Federal Reserve
System. Founded in 1930 to handle the German payment of World War I reparations, it now monitors and
collects data on international banking activity and promulgates rules concerning international bank
regulation.
Bank line
Line of credit granted by a bank to a customer.
Bankruptcy
State of being unable to pay debts. Thus, the ownership of the firms assets is transferred from the
stockholders to the bondholders.
Bankruptcy cost view
The argument that expected indirect and direct bankruptcy costs offset the other benefits from leverage so
that the optimal amount of leverage is less than 100% debt financing.
Bankruptcy risk
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
Bankruptcy view
The argument that expected bankruptcy costs preclude firms from being financed entirely with debt.
Bank wire
A computer message system linking major banks. It is used not for effecting payments, but as a mechanism
to advise the receiving bank of some action that has occurred, e.g. the payment by a customer of funds into
that banks account.
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