Letter E

Question 1

Early redemption fee

Answer 1

A fee that is typically charged by a mutual fund when the fund is redeemed within 90 days of the initial purchase.

Question 2

Extra dividend

Answer 2

An extra payment made in addition to a regular dividend payment.

Question 3

Extension date

Answer 3

For extendible bonds the maturity date of the bond can be extended so that the bond changes from a short-term bond to a long-term bond.

Question 4

Extendible bond or debenture

Answer 4

A bond or debenture with terms granting the holder the option to extend the maturity date by a specified number of years.

Question 5

Ex-rights

Answer 5

A term that denotes that the purchaser of a common share would not be entitled to a rights offering. Common shares go ex-rights two business days prior to the shareholder of record date.

Question 6

Ex-post

Answer 6

The rate of return that was actually received. This historic data is used to measure actual performance.

Question 7

Expiration date

Answer 7

The date on which certain rights or option contracts cease to exist. For equity options, this date is usually the Saturday following the third Friday of the month listed in the contract. This term can also be used to describe the day on which warrants and rights cease to exist.

Question 8

Exercise

Answer 8

The process of invoking the rights of the option or warrant contract. It is the holder of the option who exercises his or her rights. See also Assignment.

Question 9

Exercise price

Answer 9

The price at which a derivative can be exchanged for a share of the underlying security (also known as subscription price). For an option, it is the price at which the underlying security can be purchased, in the case of a call, or sold, in the case of a put, by the option holder. Synonymous with strike price.

Question 10

Expectations theory

Answer 10

A theory stating that the yield curve is shaped by a market consensus about future interest rates.

Question 11

Expansion

Answer 11

A phase of the business cycle characterized by increasing corporate profits and hence increasing share prices, an increase in the demand for capital for business expansion, and hence an increase in interest rates.

Question 12

Exchange rate

Answer 12

The price at which one currency exchanges for another.

Question 13

Exchange-traded funds (ETFs)

Answer 13

Open-end mutual fund trusts that hold the same stocks in the same proportion as those included in a specific stock index. Shares of an exchange-traded fund trade on major stock exchanges. Like index mutual funds, ETFs are designed to mimic the performance of a specified index by investing in the constituent companies included in that index. Like the stocks in which they invest, shares can be traded throughout the trading day.

Question 14

Exempt list

Answer 14

Large professional buyers of securities, mostly financial institutions, that are offered a portion of a new issue by one member of the banking group on behalf of the whole syndicate. The term exempt indicates that this group of investors is exempt from receiving a prospectus on a new issue as they are considered to be sophisticated and knowledgeable.

Question 15

Exempt investor

Answer 15

Investors who meet certain qualifications that permit them to purchase securities without receiving a prospectus.

Question 16

Ex-dividend date

Answer 16

The date that the shares start to trade ex-dividend. See ex-dividend.

Question 17

Ex-dividend

Answer 17

A term that denotes that when a person purchases a common or preferred share, they are not entitled to the dividend payment. Shares go ex-dividend one business day prior to the shareholder record date. See also Cum Dividend.

Question 18

Exchange-traded notes (ETNs)

Answer 18

Exchange-traded debt obligations issued by a bank that promises to pay investors a return on their investment based on the performance of a specific reference asset such as an index or another benchmark.

Question 19

Exchange-Traded Funds (ETFs) Facts

Answer 19

A summary disclosure document that ETFs are required to produce and file.

Question 20

Exchange-traded fund wraps

Answer 20

A discretionary account where a single annual fee, based on the account’s total assets, is charged. Often directed by a single portfolio manager, the managed account holds a basket of ETFs for security selection. The underlying ETFs tend to be passive in the investment management.

Question 21

Equilibrium price

Answer 21

The price at which the quantity demanded equals the quantity supplied.

Question 22

Equipment trust certificate

Answer 22

A type of debt security that was historically used to finance “rolling stock” or railway boxcars. The cars were the collateral behind the issue and when the issue was paid down the cars reverted to the issuer. In recent times, equipment trusts are used as a method of financing containers for the offshore industry. A security, more common in the U.S. than in Canada.

Question 23

Exchange fund account

Answer 23

A special federal government account operated by the Bank of Canada to hold and conduct transactions in Canada’s foreign exchange reserves on instructions from the Minister of Finance.

Question 24

Ex-ante

Answer 24

A projection of expected returns – what investors expect to realize as a return.

Question 25

Event-driven strategies

Answer 25

A type of hedge fund that seeks to profit from unique events such as mergers, acquisitions, stock splits or buybacks.

Question 26

Eurobonds

Answer 26

Bonds that are issued and sold outside a domestic market and typically denominated in a currency other than that of the domestic market. For example, a bond denominated in Canadian dollars and issued in Germany would be classified as a Eurobond.

Question 27

European-style option

Answer 27

An option that can only be exercised on a specified date – normally the business day prior to expiration.

Question 28

Escrowed shares

Answer 28

Outstanding shares of a company which, while entitled to vote and receive dividends, may not be bought or sold unless special approval is obtained. Mining and oil companies commonly use this technique when treasury shares are issued for new properties. Shares can be released from escrow (i.e., freed to be bought and sold) only with the permission of applicable authorities such as a stock exchange and/or securities commission.

Question 29

ETF Facts

Answer 29

A summary disclosure document that ETFs are required to produce and file.

Question 30

Ethics

Answer 30

Defined as the rules or standards governing the behaviour of a particular group or profession, a set of moral principles or values, or the study of the general nature of morals and the moral choices made by individuals.

Question 31

Equity

Answer 31

Ownership interest in a corporation’s stock that represents a claim on its revenue and assets. See also Stock.

Question 32

Equity accounting method

Answer 32

An accounting method used to determine income derived from a company’s investment in another company over which it exerts significant influence.

Question 33

Equity value per common share

Answer 33

A financial ratio, also called book value per common share, measures the net asset coverage for each common share if all assets were sold and all liabilities were paid.

Question 34

Equity securities

Answer 34

Evidence of a share of ownership stake in the company that issued the security.

Question 35

Equity fund

Answer 35

Funds in the equity category must invest a minimum of 90% of their non-cash assets in equity securities. The main investment objective of equity funds is long-term capital growth.

Question 36

Equity-based exchange-traded fund

Answer 36

Commodity ETF that invests in listed companies that are involved in exploration and development or in the processing or refining of a commodity.

Question 37

Earned income

Answer 37

Income that is designated by Canada Revenue Agency for RRSP calculations. Most types of revenues are included with the exception of any form of investment income and pension income.

Question 38

Earnings per common share

Answer 38

A financial ratio that shows the earnings available to each common share.

Question 39

Emerging growth industries

Answer 39

Brand new industries in the early stages of growth. Often considered as speculative because they are introducing new products that may or may not be accepted and may face strong competition from other new entrants.

Question 40

Election period

Answer 40

When an investor purchases an extendible or retractable bond, they have a time period in which to notify the company if they want to exercise the option.

Question 41

Efficient market hypothesis

Answer 41

The theory that a stock’s price reflects all available information and reflects its true value.

Question 42

Earnings per share (eps)

Answer 42

A value ratio that shows the portion of net income for a period attributable to a single common share of a company. For example, a company with $100 million in earnings and with 100 million common shareholders would report an EPS of $1 per share.

Question 43

Economic indicators

Answer 43

Statistics or data series that are used to analyze business conditions and current economic activity. See also leading, lagging, and coincident indicators.

Question 44

Economies of scale

Answer 44

An economic principle whereby the per unit cost of producing each unit of output falls as the volume of production increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.