B

Question 1

Back-End Load

Answer 1

A sales charge applied on the redemption of

a mutual fund.

Question 2

Balance of Payments

Answer 2

Canada’s interactions with the rest of the
world which are captured here in the current
account and capital account.

Question 3

Bank of Canada

Answer 3

Canada’s central bank which exercises its
infl uence on the economy by raising and
lowering short-term interest rates.

Question 4

Bank Rate

Answer 4

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

Question 5

Bankers’ Acceptance

Answer 5

A commercial draft (i.e., a written
instruction to make payment) drawn by a
borrower for payment on a specifi ed date. A
BA is guaranteed at maturity by the
borrower’s bank. As with T-bills, BAs are
sold at a discount and mature at their face
value, with the difference representing the
return to the investor. BAs may be sold
before maturity at prevailing market rates,
generally offering a higher yield than
Canada T-bills.

Question 6

Banking Group

Answer 6

A group of investment fi rms, each of which
individually assumes fi nancial responsibility
for part of an underwriting

Question 7

Bankrupt

Answer 7

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

Question 8

Basis Point

Answer 8

One-hundredth of a percentage point of
bond yields. Thus, 1% represents 100 basis
points.

Question 9

Bear

Answer 9

One who expects that the market generally,
or the market price of a particular security,
will decline. See also Bull.

Question 10

Bear Market

Answer 10

A sustained decline in equity prices. Bear
markets are usually associated with a
downturn (recession or contraction) in the
business cycle.

Question 11

Bearer Security

Answer 11

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 holder,
i.e., the holder is the deemed owner of the
security. See also Registered Security.

Question 12

Beneficial Owner

Answer 12

The real (underlying) owner of an account,
securities or other assets. An investor may
own shares which are registered in the name
of an investment dealer, trustee or bank to
facilitate transfer or to preserve anonymity,
but the investor would be the benefi cial
owner

Question 13

Beneficiary

Answer 13

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

Question 14

Best Efforts Underwriting

Answer 14

The attempt by an investment dealer
(underwriter) to sell an issue of securities,
to the best of their abilities, but does not
guarantee that any or all of the issue will be
sold. The investment dealer is not held
liable to fulfill the order or to sell all of the
securities. The underwriter acts as an agent
for the issuer in distributing the issue.

Question 15

Beta

Answer 15

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 have 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 16

Bid

Answer 16

The highest price a buyer is willing to pay
for the financial instrument being quoted.
See also Ask.

Question 17

Blue Chip

Answer 17

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 18

Blue Sky

Answer 18

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

Question 19

Bond

Answer 19

A certifi cate evidencing a debt on which
the issuer promises to pay the holder a
specifi ed amount of interest based on the
coupon rate, for a specifi ed length of time,
and to repay the loan on its maturity.
Strictly 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 20

Bond Contract

Answer 20

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 any 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 21

Book Value

Answer 21

The amount of net assets belonging to the
owners of a business (or shareholders of a
company) based on statement of financial
position values. It represents the total value
of the company’s assets that shareholders
would theoretically receive if a company
were liquidated. Also represents the original
cost of the units allocated to a segregated
fund contract.

Question 22

Bottom-Up Analysis

Answer 22

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

Question 23

Bought Deal

Answer 23

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 way of a 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 24

Bourse de Montréal

Answer 24

A stock exchange (also referred to as the
Montréal Exchange) that deals exclusively
with 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 25

Broker

Answer 25

an investment dealer or a duly registered individual that is registered to trade in securities in the capacity as an agent or principal and is a member of a self regulatory organization.

Question 26

Broker of Record

Answer 26

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

Question 27

Bucketing

Answer 27

Confirming a transaction where no trade

has been executed.

Question 28

Budget Defi cit

Answer 28

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

Question 29

Budget Surplus

Answer 29

Occurs when government revenue for the

year exceeds expenditures.

Question 30

Bull

Answer 30

One who expects that the market generally
or the market price of a particular security
will rise. See also Bear.

Question 31

Bull Market

Answer 31

A general and prolonged rising trend in
security prices. Bull markets are usually
associated with an expansionary phase of
the business cycle. As a memory aid, it is
said that a bull walks with his head up
while a bear walks with his head down

Question 32

Business Cycle

Answer 32

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 33

Business Risk

Answer 33

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

Question 34

Buy-Back

Answer 34

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 35

Buy-Ins

Answer 35

The obligation to buy back the stock after
selling it short if adequate margin cannot be
maintained by the client and/or if the
originally borrowed stock is called by its
owner and no other stock can be borrowed
to replace it.