vocab 1

Question 1

Accounts payble

Answer 1

Money owed by a company for goods or services puchased, payable within one year. A surrent liability on the balance sheet.

Question 2

Acounts receivable

Answer 2

money owed to a company for goods or sevices it has sold, for which payment is accepted within one year. A current asset on the balance sheet.

Question 3

Accredited investor

Answer 3

An individual or institutional investor who meets certain minimum requirements in income, net worth or investment knowlege. Also reffered to as a sophisticated investor.

Question 4

Accrued interest

Answer 4

interest accumulated on a bond or debenture since the last interest date.

Question 5

adjusted cost base

Answer 5

the deemed cost of an asset representing the sum of the amount originally paid plus any additionsl cost, such as brokerage fees and commissions

Question 6

Advance-decline line

Answer 6

A tool used in technical analaysis to measure the breadth of the market. The analyst takes difference between the number of stocks that increased in value each day less the number that has decreased.

Question 7

affiliated company

Answer 7

A company with less than 50% of its shares owned by another corporation, or one whose srock, with that of another company, is owned by the same controlling interest.

Question 8

After aquired clause

Answer 8

Aprotective clause found in a bonds indenture or contract that binds the bond issuer to pledging all subsequently purchased assets as part of the collateral for a bond issue.

Question 9

Agent

Answer 9

An investment dealer operates as an agent when it acts on behalf of a buyer or a seller of a security and does not itself own title to thye securities at any time during the transaction.

Question 10

Allocation

Answer 10

The administrative procedure by which income generated by the segregated fund’s investment portfolio is flowed through to the individual contractholders of the fund.

Question 11

All or none order (AON order)

Answer 11

A type of order in whereby the trader must execute the total numbers of shares as specified by the number on the order before the client will recieve a fill.

Question 12

Any part order

Answer 12

A type of order in which the client will accept all stock in odd, broken or board lots up to the full amount of the order.

Question 13

Alpha

Answer 13

A statistical measure of the value a fund manager adds to the performance of the fund managed. If alpha is positive, the manager has added value to the portfolio. If the alpha is negative, the manager has underperformed the market.

Question 14

Alternative trading systems (ATS)

Answer 14

Privately-owned computerized networks that match orders for securities outside of recognized exchange facilities. Also reffered to as Proprietary Electronic Trading Systems(PETS) or Non-SRO- Operated Trading Systems (NETS)

Question 15

American option

Answer 15

An option that can be exercised at any time during the option’s lifetime.

Question 16

Amortization

Answer 16

Gradually writing off the value of an intangible asset over a period of time. Commonly applied to items such as goodwill, improvements to leased premises, or expenses of a new stock or bond issue.

Question 17

Annual Information form (AIF)

Answer 17

A document which contains information, requires by law, which is not included in a mutual fund or other company’s simplified prospectus or annual financial statements. Investors do not have to be given a copy of the AIF but the prospectus must state that it is available on request.

Question 18

Annual Report

Answer 18

The formal financial statement and report on operations issued by a company to its shareholders after its fiscal year end.

Question 19

Annuitant

Answer 19

Person on whose life the maturity and death benefit guarantees are based. It can be the contract holder or someone else designated by the contract holder. In registered plans, the annuitant and contract holder must be the same person.

Question 20

Annuity

Answer 20

A contract usually sold by life insurance companies that guarantees an in come to the beneficiary or annuitant at some time in the future .The income stream can be very flexible. The original purchase price may be either a lump sum or a stream of payments.

Question 21

Arbitrage

Answer 21

The simultaneous purchase of a security on one stock exchange and the sale of the same security on another exchange at prices which yield a profit to the arbitrageur.

Question 22

Arbitration

Answer 22

A method of dispute resolution in which an independant arbitrator is chosen to assist aggrieved parties to recover damages.

Question 23

Arrears

Answer 23

Interest or dividends that were not paid when due but are still owed. For example, dividends owed but not paid to cumulative preferred shareholders accumulate in a seperate account(arrears). When payment resume, dividends in arrears must be paid to the preferred shareholders before the common shareholders.

Question 24

Ask

Answer 24

The lowest price a seller will accept for the financial instrument being quoted.

Question 25

Assets

Answer 25

Everything a company or a person owns or has owed to it. A balance sheet category.

Question 26

Asset allocation

Answer 26

Apportioning investment funds among different categories of assets, such as cash, fixed income securities and equities. The allocation of assets is built around an investor's risk tolerance.

Question 27

Asset mix

Answer 27

The percentage distribution of assets in a portfolio among the three major asset classes; cash and equivalents, fixed income and equities.

Question 28

Assignment

Answer 28

The random process by which the clearing corporations allocated the exercise of an option to a members firm. A client of that member firm is then chosen to fulfil the obligation taken on when the option was written, by; in the case of a put, purchasing the underlying security from the put holder; or, in the case of a call, delivering the inderlying security to the call holder.

Question 29

At-The-Money

Answer 29

An option with a strike price equal to ( or almost equal to) the market price of the underlying security.

Question 30

Attribution Rules

Answer 30

A Canada custom and revenue agency rule stating that an investor cannot avoid paying taxes at their marginal rate by transferring assets to other family members who have lower personal tax rates.

Question 31

Auction market

Answer 31

Auction in which securities are bought and sold by brikers acting as agents for their clients, in contrast to a dealer market ehere teades are conducted over-the-counter. For example the Toronto stock exchange is an auction market.

Question 32

Auction preferred shares

Answer 32

A type of preferred share that offers a dividend rate determined by an auction between the holder and the issuer.

Question 33

Audit

Answer 33

A professional review and examination of a company's financial statement required under corporate law for the purpose of ensuring that the statements are fair, consistent and conform with Generally Accepted Accounting Principles (GAAP)

Question 34

Authorized shares

Answer 34

The maximum number of commom (or preferred) shares that a corporation may issue under the terms of its charter.

Question 35

Automatic Stabilizers

Answer 35

Elements in the economy which mitigate the extremes of the business cycle by running counter to it. Example; government payouts for unemployment insurance in recessionary periods.

Question 36

Averages

Answer 36

A statistical tool used to measure the direction of the market. The most common average is the Dow Jones industrial average.

Question 37

Back-end load

Answer 37

A sale charge applied on the redemption of a mutual fund.

Question 38

Balance of payments

Answer 38

Canada's interaction with the rest of the world which are captures in both the current and capital accounts. The balance of payments is divided into two components ; the current account and the capital account.

Question 39

Balance sheet

Answer 39

A financial statement showing a company's assets, liabilities and shareholders equity on a given date.

Question 40

Balloon

Answer 40

In some seriel bond issues or mortgages an extra large amount may mature in the final year of the series - the "balloon" payment.

Question 41

Bank of Canada

Answer 41

Canada's central bank which exercises its influence in the economy by raising and lowering short term interest rates.

Question 42

Bank rate

Answer 42

The minimum rate at which the Bank of Canada makes short-termadvances to the chartered bankd, other members of the Canadian Payment Association and investment dealers who trade in the money market.

Question 43

Bankers Acceptance

Answer 43

A type of short-term negotiable commercial paper issued by a non-financial corporation but guaranteed as to principal and interest by its bank. The guarantee results in a higher issue price and consequent lower yields.

Question 44

Banking group

Answer 44

A group of investment firms, each of which individually assumes financial responsibility for the part of underwriting.

Question 45

Bankrupt

Answer 45

The legal status of an individual or company that is unable to pay irs creditors and whose assets are therefore administered for its creditors by a trustee in bankruptcy.

Question 46

Basis point

Answer 46

A phrase to describe differences in bond yields, with one basis point representing one-hundredth of a percentage point. Thus, if Bond X yields 11.50% and Bond Y 11.75%, the is 25 basis points.

Question 47

Bear market

Answer 47

A sustained decline in equity prices. Bear markets are usually associated with a downturn (recession or contraction) in the cycle. As a memory aid, it is said that a bear walks with his head down while a bull walks with his head up.

Question 48

Bearer security

Answer 48

A security (stock or bond) which does not have the owner's name recorded in the books of the issuing company nor on the security itself and which is payable to the deemed owner of the security.

Question 49

Beneficial owner

Answer 49

The real owner of shares (or other assets). An investor may own shares which are registered in the name of a broker, trustee or bank to facilitate transfer or to preserve anomymity, but the investor would be the beneficial owner.

Question 50

Beneficiary

Answer 50

The individual or individuals who have been designated to receive the death benefit. Beneficiaries may be either revocable or irrevocable.

Question 51

Best Efforts underwriting

Answer 51

The underwiter agrees to use its best efforts to sell a new issue of securities, but does not guarantee the issuing company that any or all of the issue will be sold. The inderwriter acts as an agent for the issuer in distributing the issue to its clients.

Question 52

Beta

Answer 52

A measure of the sensitivity (i.e. volatility) of a stock or a mutual fund to movements in the overall stock market. the beta for the market is considered to be 1. A fund that mirrors the market, such as an index fund, would also has a beta of 1. Funds or stocks with a beta greater than 1 are more volatile than the market and are therefore riskier. A beta less than 1 is not as volatile and can be expected to rise and fall by less than the overall market.

Question 53

Bid

Answer 53

The highest price a buyer is willing to pay for the financial instument being quoted.

Question 54

Blue chip

Answer 54

An active, leading, nationally known common stock with a record of continuous dividend payments and other strong investment qualities. The implication is that the company is of 'good' investment value.

Question 55

Blue sky

Answer 55

A slang term for laws that various Canadian provinces and American states have enacted to protect the public againsts securities frauds. The term blue skyed is used to indicate that a new issue has been cleared by a securities commision and may be distributed.

Question 56

Board lot

Answer 56

A regular trading unit which has uniformly been decided upon by stock exchanges, in most cases 100 shares

Question 57

Bond

Answer 57

A certificate evidencing a debt on which the issuer promises to pay the holder a specified amount of interest based on the coupon rate, for a specified lenght of time, and to repay the loan on its maturity. Strickly speaking, assets are pledged as security for a bond issue, except in the case of government "bonds" , but the term is often loosely used to describe any funded debt issue.

Question 58

Bond contract

Answer 58

the actual legal agreement between the issuer and the bondholder. The contract outlines the terms and conditions - the coupon rate, timing of coupon payments, maturity date and other terms. The bond contract is usually administered by a trust company on behalf of all the bondholders. Also called a Bond indenture or Trust deed.

Question 59

Bond switches

Answer 59

An investment strategy whereby the investor may sell one bond and replace it with another, to capture some advantage such as yield improvement.

Question 60

Book value

Answer 60

The amount of net assets belonging to the owners of a business (or shareholders of a company) based on the balance sheet values. Also represents the original cost of the units allocated to a segregated fund contract.

Question 61

Bottom-up investment approach

Answer 61

An investment approach that seeks out indervalued companies. A fund manager may find companies whose low share prices are not justified. They would buy these securities and when the market fianlly realizes that they are undervalued, the share price rises giving the astute bottom up manager a profit.

Question 62

Bought deal

Answer 62

A new issue of stocks or bonds bought from the issuer by an investment dealer, frequently acting alone, for resale to its clients, usually by a way of private placement or short form prospectus. The dealer risks its own capital in the bought deal. In the event that the price has to be lowered to sell out the issue, the dealer absorbs the loss.

Question 63

Bourse de Montreal

Answer 63

A stock exchange that deals exclusively eith non-agricultural options and futures in Canada, including all options that previously traded on the Toronto Stock Exchange and all futures products that previously traded on the Toronto Futures Exchange.

Question 64

Broker

Answer 64

A securities firm or a duly registered individual associated with one. The broker does not usually own the securities that it buys and sells, but acts as agent for the buyer or seller and charges a commision for its services.

Question 65

Broker of record

Answer 65

The broker named as the official advisor to a corporation on financial matters; has the right of first refusal on any new issue.

Question 66

Budget deficit

Answer 66

Occurs when total spending by the government for the year is higher than revenue collected.

Question 67

Budget surplus

Answer 67

Occurs when government revenue for the year exceeds expenditures.

Question 68

Bucketing

Answer 68

Confirming a transaction when no trade has been executed.

Question 69

Bull market

Answer 69

A general and prolonged rising trend in security prices. Bull markets are usually associated with an expansionary phase of the business cycle.

Question 70

Business cycle

Answer 70

The recurrence of periods of expansion and recession in economic activity. Each cycle is expected to move through five phases - the trough, recovery, expansion, peak, contraction (recession). Given an understanding of the relationship between the business cycle and security prices an investor or fund manager would select an asset mix to maximize returns.

Question 71

Business risk

Answer 71

The risk inherent in a company's operations, reflected in the variability in earnings. A weakening in consumer interest or technological obsolescence usually causes the decline. Examples include manufacturers of vinal records, eight track recording tapes and beta video machines.

Question 72

Buy-Back

Answer 72

A company's purchase of its common shares either by tender or in the open market for cancellation, subsequent resale or for dividend reinvestment plans.

Question 73

Buy-ins

Answer 73

If a client or a broker fails to deliver securities sold to another broker within a specified number of days after the value (settlement) date, the receiving brokers may buy-in the securities in the open market and charge the client or the delivering broker the cost of such purchases.

Question 74

Callable

Answer 74

May be redeemed (called in) upon due notice by the security's issuer.

Question 75

Call feature

Answer 75

A clause in a bond or preferred share agreement that allows the issuer the right to "call back" the securities prior to maturity. The company would usually do this if they can refinance the debt at a lower rate ( similar to refinancing a mortgage at a lower rate). Calling back a security prior to maturity may involve the payment of a penalty known as a call premium.

Question 76

Call option

Answer 76

The right to buy a specific number of shares at a specified price (the strike price) by a fixed date. The buyer pays a premium to the seller of the call option contract. An investor would buy a call option if the underlying stock's price is expected to rise.

Question 77

Call price

Answer 77

The price at which a bond or preferred share with a call feature is redeemed by the issuer. This is the amount the holder of the security would receive if the security was redeemed prior to maturity. The call price is equal to par (or a stated value for preferred shares) plus any call premium.

Question 78

Call protection

Answer 78

For callable bonds, the period before before the first possible call date.

Question 79

Canadian Deposit Insurance CDIC

Answer 79

A federal crown corporation providing deposit insurance against loss ( up to $60,000 per depositor) when a member institution fails.

Question 80

Canada education saving grant CESG

Answer 80

An incentive for those investing in a Registered education savings plan (RESP) whereby the federal government will make a matching grant of 20% of the first $2000 contributed each year to the RESPof a child under age 18.

Question 81

Canadian pension plan CPP

Answer 81

A mandatory contributory pensionplan designed to provide monthly retirement, disability and suvivor benefits for all canadians. Employers and employees make equal contributions. Quebec has its own parallel pension plan Quebec pension plan (QPP).

Question 82

Canada premium bonds CPBs

Answer 82

A relatively new type of savings product that offers a higher interest rate compared to the Canada Savings Bond and is redeemable once a year on the anniversary of the issue date or during the 30 days thereafter without penalty.

Question 83

Canada Savings Bonds | (CSBs)

Answer 83

A type of savings product that pays a competitive rateof interest and that is guaranteed for one or more years. They may be cashed at any time and, after the first three months, pay interest up to the end of the month prior to being cashed.

Question 84

Canadian council of insurance regulators

Answer 84

The association of insurance regulators in jurisdictions across Canada.

Question 85

Canadian Depository for Securities Limited (CDS)

Answer 85

The national securities depository, clearing and settlement centre in Canada that handles settlement for most bonds.

Question 86

Canadian Derivatives clearing Corporation (CDCC)

Answer 86

The sole clearing corporation for all exchange- traded options and futures in Canada.

Question 87

Canadian investor protection fund | (CIPF)

Answer 87

A fund set up by the stock exchanges and the Investment Dealers Association to protect investors from losses resulting from bankruptcy of a member firm.

Question 88

Canadian Life and Health Insurance Association Incorporated (CLHIA)

Answer 88

The national trade group of the life insurance industry, which is actively involved in overseeing applications and setting industry standards.

Question 89

Canadian Originated Preferred Securities (COPrS)

Answer 89

Introduced to the Canadian market in March 1999, as long-term junior subordinated debt intruments. This type of instrument offers features that resemble both long term corporate bonds and preferred shares.

Question 90

Canadian payments association

Answer 90

Established in the 1980 revision of the bank act, this association operates a highly automated national clearing system for interbank payments. Members include chartered banks, trust and loan companies and some credit uniions and caisses.

Question 91

Canada Securities Administrators | (CSA)

Answer 91

An association that is comprised of the administrators of each province that meets regulatory issues of national importance as well as to coordinate the implementation of national policies.

Question 92

CanadianTrading and Quotation system inc. (CNQ)

Answer 92

Launched in 2003 as an alternative market place for trading equity securities and emerging companies.

Question 93

CanDeal

Answer 93

Provides institutional investors with electronic access to federal bond bid and offer prices and yields from its six bank-owned dealers.

Question 94

CanPx

Answer 94

A joint venture of several IDA member firms and operates as an electronic trading system for fixed income securities providing investors with real time bid and offer prices and hourly trade data.

Question 95

Capital

Answer 95

Has two distinct but related meanings. To an economist, it means machinery, factory and inventory required to produce other products. To an investor, it may mean the total of financial assets invested in securities, a home and other fixed assets, plus cash.

Question 96

Capital and financial account

Answer 96

Account which reflects the transactions occurring between Canada and foreign countries with respect to the acquisition of assets, such as land or currency. Along with the current account a component of the balance of payments.

Question 97

Capital Asset Pricing Model | (CAPM)

Answer 97

A model that looks at the relationship between risk and return. In simple terms, the CAPM says that the return on an asset or security is equal to the risk-free return plus a risk premium.

Question 98

Capital Cost Allowance | (CCA)

Answer 98

An amount allowed under the income tax act to be deducted from the value of certain assets and treated as an expense in computing an individual's or company's income for a taxation year. It may differ from the amount charged for the period in depreciation accounting.

Question 99

Capital gain

Answer 99

Selling a security for more than its purchase price. For non registered securities, 50% of the gain would be added to income and taxed at the investor's marginal rate.

Question 100

Capital leases or capitalized leases

Answer 100

An expenditure recorded on the balance sheet as an asset rather than as an expense.