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Finance Dictionary and Glossary of Investment Terms
Letter of Intent
1. A letter that describes in detail a corporation's intention to act on something.2. It is also a way to protect your son or daughter from unnecessary chaos and turmoil when he or she must depend upon someone other than you for care and support (if you suddenly pass away).
An assurance by a mutual fund shareholder that a certain amount of money will be invested monthly, in exchange for lower sales charges. In mergers, a preliminary merger agreement between companies after significant negotiations.
A letter from one company to another acknowledging a willingness and ability to do business. A letter of intent is most often issued as acknowledgment of the fact that a merger between companies or an acquisition is being considered seriously. Sometimes, a letter of intent may also be issued by a mutual fund shareholder to indicate that he/she would like to invest certain amounts of money at certain specified times. In exchange for signing a letter of intent, the shareholder would often qualify for reduced sales charges. A letter of intent is not a contract and cannot be enforced, it is just a document stating serious intent to carry out certain business activities.
A letter that formalizes the relationship between an underwriter and a company preparing to go public. The letter of intent outlines the underwriter fees, ranges for stock prices, and other terms of the underwriter's agreement. (See underwriter)