Finance interview quotes

Illiquid -- describes an asset that cannot easily be converted into cash; the opposite of liquid. Illiquid assets can be converted into cash, but usually only after a period of time and often at a loss in value.

Immediate purchase contract -- an over-the-counter offer by a seller to a purchaser of a mortgage.

Implied warranty -- a provision of the law that holds that a product is guaranteed to be fit for consumption or use even though the manufacturer or merchant makes no written statement to that effect.

Impound -- to seize, hold, or place in protective custody by order of a court. Examples include impounded property and impounded records.

Impound account -- see escrow account.

Imprest fund -- (1) available money of a designated amount maintained in order to pay for small, routine operating expenses of a business or other organization. Also called a petty cash fund. (2) a loan of government funds

Improved real estate -- real property on which one or more structures have been built for either residential or business use, or a combination of both.

Improvements -- additions to raw land that normally increase its usefulness and value, such as buildings, streets and sewers.

Inactive account -- a savings account on which no transaction has occurred (except the crediting of earnings) for a specific number of years. Also called a dormant account.

Inalienable -- something that may not be sold, transferred or assigned to another.

Inchoate -- newly begun, incomplete, not organized.

Inchoate courtesy -- the imperfected ownership interest that the law gives a husband in the properties of his wife, which becomes perfected upon the death of the wife and may result in possession and use.

Inchoate dower -- the imperfected interest that the law gives a wife in the property of her husband, which becomes perfected upon the death of the husband and may result in possession and use.

Income -- money or its equivalent received in exchange for labor, for services, from the sale of goods or property, or as earnings on investments.

Income approach to value -- the process of estimating the market value of a property by comparing the net rental income the property would produce over its remaining effective life with the yields that could be obtained from other kinds of investments of comparable risk.

Income beneficiary -- a person designated to receive income from a trust during the term of the trust.

income capital certificate (ICC) -- an instrument developed by the former Federal Savings and Loan Insurance Corporation to provide assistance to troubled thrift institutions. Under the program, the thrift issued ICCs to the FSLIC in return for cash or the FSLIC's promissory notes. The thrift was allowed to count outstanding ICCs as part of its net worth (minimum required capital). As the institution regained financial health, the ICCs were retired.

Income limits -- maximum amounts that families may earn in order to qualify for admission into low- and moderate-income housing projects or for rent supplement assistance. The limits, established by law, are based on family size and geographic location.

Income property -- real estate owned or operated to produce revenue.

Income property loan -- see commercial mortgage loan.

Income statement -- a financial statement that contains a summary of a business' financial operations for a specific period of time. It shows the net profit or loss for the period by stating the company's revenues and expenses.

Income stock -- a stock that pays higher than average dividends. In order to pay above-average dividends, a corporation must have a steady, predictable source of income.

Incorporeal -- of no material substance. Something that exists with no physical properties, such as rights or privileges.

Incorporeal property -- intangible personal property lacking in physical substance, such as property rights, leases and mortgages.

Indebtedness -- the state of being in debt, of owing money or something of value. Any form of liability.

Indefeasible -- incapable of being annulled or rendered void, such as an indefeasible title to property.

Indemnify -- to compensate for an actual, sustained loss so as to restore to the condition prevailing before the loss.

Indemnity -- (1) payment for damage, a guarantee against losses. (2) a bond protecting the insured against losses caused by others failing to fulfill their obligations. (3) the granting of

exemption from prosecution. (4) an option to buy or sell a specific quantity of stock at a stated price within a given period of time.

Indenture -- (1) the formal agreement between a group of bondholders and the bond issuer containing terms of the debt. (2) a deed, written contract, or sealed agreement. The term derives from an old practice of actually indenting the deed by cutting or tearing it in half with a jagged or indented edge so that the two parts could subsequently by matched by the grantor and the grantee.

Independent audit -- an examination of financial statements conducted by an outside CPA (one not employed by the firm being examined) according to generally accepted auditing standards (GAAS) for the purpose of expressing an opinion as to whether the statements are a fair presentation in accordance with generally accepted accounting principles (GAAP).

Index -- a number that is adjusted at set intervals to describe relative changes in the quantity of goods, services or levels of activity. An example is the consumer-price index. Changes in interest payments of adjustable rate mortgages are usually based on an index such as the National Average Mortgage Contract Rate Index or Cost of Funds Index published by the Office of Thrift Supervision.

Index amortizing note (IANs) -- a note that repays principal over a period of time that lengthens or shortens according to an amortization schedule linked to a specific index, usually LIBOR. As interest rates increase, the IAN's maturity extends longer, an effect similar to what happens to a collateralized mortgage obligation when prepayment rates decrease. An IAN is a type of structured note.

indirect loan -- a loan that is transferred to a third party after being originated by a dealer, retailer or other seller of goods or services to finance the purchase of those goods or services. The loan is an indirect loan from the third party (to whom it is transferred) to the consumer of the goods or services bought on credit.

Individual account -- a savings account owned and controlled by one person rather than by a corporation or other legal entity.

individual minimum capital requirement (IMCR) -- an order issued by the Office of Thrift Supervision to a savings institution ordering the thrift to hold higher capital than would be required under the agency's regulations, or federal law. IMCRs may be issued to institutions experiencing unusual problems including high exposure to interest rate risk and credit risk, inadequate liquidity, operating problems, inadequate underwriting policies, and low-yielding assets.

Individual retirement account (IRA) -- an interest-earning retirement savings account in which the allowable contributions and earnings are not taxed until the funds are withdrawn, after age 59 1/2.

Industrial bank -- a limited service financial institution that raises funds by selling certificates called "investment shares" and by accepting deposits, and invests such funds in installment loans to consumers and to small businesses. Often such loans are secured by a third party who signs a co-maker note pledging to repay the loan if the borrower defaults, or the loan is secured by a chattel mortgage. Industrial banks are sometimes called Morris Plan banks or industrial loan companies. Industrial banks are distinguished from commercial loan companies because industrial banks accept deposits in addition to making consumer loans. Industrial banks are distinguished from commercial banks because industrial banks do not offer demand deposit (checking) accounts.

Industrial revenue bond -- a financing technique in which a municipality or its development corporation issues bonds to finance revenue-producing projects. Revenue thus generated is used to pay the debt service on the bonds.

Industry condition report (ICR) -- any of the financial reports savings associations are required to file with the Office of Thrift Supervision.

In fee -- ownership of land with all the rights and obligations of ownership including the right to sell or give away the land or pass it on to one's heirs.

In-fill housing -- housing that is built on vacant lots in built-up areas of a city.

Infirmity -- any known act or visible omission in detail during the creation or transfer of title that would invalidate the title.

Inflation -- an economic condition marked by a decrease in the purchasing power of the dollar and a general rise in prices.

Ingress -- to go in, to enter. It is used with the word egress to describe the right of access to land.

Inheritance tax -- a state tax based on the value of property passing to each heir. It differs from the estate tax in that kinship generally determines the tax rate and the exempt amount, while the estate tax is a net value tax. See estate tax.

Initial closing -- the act in which a lender funds a construction loan.

Initial public offering (IPO) -- the first time a company offers to sell its stock to the public. An IPO of a newly formed corporation takes place before the stock begins trading in the market, and the price of the IPO shares is fixed by the company.

Injunction -- a court order prohibiting an act or compelling an act to be performed.

Inner city -- the older, central part of a city, often characterized by crowded, run-down, low-income neighborhoods.

Insider -- an individual who by virtue of his or her employment or other close relationship has information on the financial status of a firm or a particular transaction before that information is available to the general public.

Insolvency -- the inability to pay one's debts as they come due. Even though the total assets of an organization may exceed its total liabilities, the entity is insolvent if the assets cannot be converted into cash to meet the current obligations.

Insolvent -- the state of being unable to pay debts when demanded by creditors at maturity.

Installment -- the regular, periodic payment that a borrower agrees to make to a lender to repay a debt.

Installment credit -- the practice of paying for goods or services after receiving them by making two or more payments within a specified period of time.

Institution -- an organization, foundation or establishment devoted to a particular type of endeavor, such as a savings institution.

Institutional lender -- a financial institution or mortgage lender that invests its own funds and funds it is managing in real estate mortgages. Examples include savings and loan associations, savings banks, commercial banks, life insurance companies and pension and trust funds.

Instrument -- any written document that sets forth a legal agreement. See financial instrument.

Instrumentality -- an organization created by the federal government whose obligations are not the direct obligation nor guaranteed by the federal government.

Insufficient funds -- the situation in which the drawer's deposit balance is less than the amount of the drawer's check presented for payment.

Insured closing letter -- a document issued by a title insurance company in connection with an about-to-be-issued title insurance policy. It protects a mortgagee who is forwarding funds to a title insurance company's agent or attorney against an embezzlement of funds or a failure to follow specific closing instructions.

Intangible asset -- an asset that has no substance or physical properties. Intangible assets include goodwill, patent rights, permits, copyrights and licenses.

Inter-American Development Bank -- a multinational financial organization established in 1959 to encourage economic development in 21 member Latin American nations.

Interest -- a fee paid for using money that belongs to another, usually expressed as an annual percentage of the amount used. A financial institution makes periodic payments of interest to savers for the use of their deposited funds. A borrower pays interest to the financial institution for the use of its funds.

Interest credited -- interest that a savings institution automatically deposits to a savings account.

Interest earned -- interest generated but not yet credited or paid.

Interest margin -- the dollar amount of interest earned on assets minus the dollar amount of interest paid on liabilities.

Interest only (IO) -- see stripped mortgage-backed securities.

Interest paid -- interest that a savings institution mails directly to a depositor.

Interest rate -- the percentage of the principal paid by the borrower to the lender for the use of the lender's money.

Interest rate risk -- the risk that a savings association's assets and/or liabilities will decline in market value because of changes in market interest rates. For example, on the asset side, an old loan earning 10 percent will be worth less to the association if interest rates on new loans rise to 12 percent. On the liabilities side, an existing certificate of deposit yielding 10 percent becomes relatively more costly to the association if the interest rate on a comparable new CD drops to 8 percent.

Interest rate spread --a percent calculated as follows: (dollars of interest earned divided by the dollar amount of interest earning assets) minus (dollars of interest paid divided by the dollar amount of interest costing liabilities).

Interest rate swap -- a contractual agreement whereby two parties exchange interest payments on a notional amount of principal during a predetermined period. In a fixed/floating swap, fixed-rate interest rate payments are exchanged for variable-rate payments. In a floating/floating swap, payments tied to two types of short-term variable indices are exchanged. Interest rate swaps are an asset/liability management tool.

Interim loan -- a short-term mortgage loan, often for the construction of a building.

Interlocking directorate -- the situation in which one or more members of the board of directors of one business are also members of the board of directors of another corporation.

Intermediation -- the process carried out by a financial institution serving as a link, or intermediary, between borrowers and savers. Savers deposit funds in the institution, which lends those funds to home buyers and other borrowers. See disintermediation.

International Bank for Reconstruction and Development -- (The World Bank) an organization proposed at the July 1944 Bretton Woods Conference, which began operation in June 1946. Initially, it provided loans for reconstruction following World War II. Its primary function now is to provide loans for economic development.

International Monetary Fund (IMF) -- an international organization with 146 members, including the United States. The main functions of the International Monetary Fund are to lend member nations funds to finance solutions to temporary balance of payments problems, to facilitate the expansion and balanced growth of international trade, and to provide international monetary cooperation among nations. The IMF also creates additional reserves for member nations called special drawing rights. Member nations must subscribe to a Fund quota, making payments mainly in their own currency. The IMF grew out of the Bretton Woods Conference of 1944.

Intestate -- the situation in which a person dies without leaving a valid will.

In the money -- a situation in which an investor will receive a profit from the sale or purchase of a financial instrument. This results when the investor holds a contract to buy a stock at a price less than its market value, or holds a contract to sell a stock at a price greater than its market value.

Intrinsic value -- (1) the market value of something's tangible material. (2) the difference between the option price and the market value of the underlying security, if the option to buy or sell is exercised immediately.

Inventory loan -- a loan granted for the purpose of purchasing inventory for resale, particularly manufactured (mobile) homes.

Inverse floater -- an asset, such as a mortgaged backed bond, paying an adjustable interest rate that rises or falls in the opposite direction of the movement of general market interest rates. The floating coupon rate is calculated as the difference between a constant interest rate and a designated index. For example, the floating rate might be 14 percent minus the current rate of LIBOR. As LIBOR increases, the bond's coupon payment rate decreases and vice versa. An inverse floater is a type of structured note.

Investment -- an outlay of a sum of money to be used in such a way that a profit or increase in capital may be expected.

Investment banker -- an underwriter who serves as a middleman between a corporation issuing new securities and the public. Usually, an investment banker, or several investment bankers in a syndicate, buy the securities issue outright, then sell the securities to individuals or institutions.

Investment Company -- a financial intermediary that sells shares and invests the proceeds in a portfolio of stocks and bonds.

Investor -- an individual whose primary concerns in the purchase of a security are regular dividend income, safety of the original investment, and if possible, capital appreciation.

Invoice -- an instrument prepared by a seller of goods or services listing all such items sold, and presented to the buyer for payment.

Involuntary lien -- a lien imposed on property without the consent of the owner. Examples include taxes, special assessments for such items as nearby sidewalks or sewers, and judgments.

IRA -- see individual retirement account.

Irrevocable trust -- a trust that cannot be annulled by the grantor, the person who originally set up the trust.

Issue -- any of a company's or agency's securities, usually grouped by the same initial sales date. Also, the act of distributing such securities to the buyers.