Chapter - 8

Question 1

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 separate account. When payments resume, dividends in arrears must be paid to the preferred shareholders before the common shareholders.

Answer 1

arrears

Question 2

Securities designed to give Canadians access to popular U.S. and global companies that trade on the NYSE and NASDAQ, but in Canadian dollars and listed on the Canadian NEO exchange

Answer 2

Canadian Depositary Receipts (CDR)

Question 3

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

Answer 3

capital gains

Question 4

The method used to increase or reduce the number of underlying shares of the CDR based on how the Canada/U.S. exchange rate changes

Answer 4

CDR Ratio

Question 5

A process of retiring old shares with fewer shares. For example, an investor owns 1,000 shares of ABC Inc. pre-split. A 10 for 1 ___ or ___ reduces the number held to 100. Results in a higher share price and fewer shares outstanding.

Answer 5

consolidation, reverse stock split

Question 6

With dividend. If you buy shares quoted ___, i.e., before the ex-dividend date, you will receive an upcoming already-declared dividend. If shares are quoted ex-dividend (without dividend) you are not entitled to the declared dividend.

Answer 6

cum dividend

Question 7

A preferred stock having a provision that if one or more of its dividends are not paid, the unpaid dividends accumulate in arrears and must be paid before any dividends may be paid on the company’s common shares.

Answer 7

cumulative

Question 8

The date upon which a company determines which shareholders are entitled to the declared dividend

Answer 8

dividend record date

Question 9

The automatic reinvestment of shareholder dividends in more shares of the company’s stock

Answer 9

dividend reinvestment plan

Question 10

An amount distributed out of a company’s profits to its shareholders in proportion to the number of shares they hold. Over the years a preferred dividend will remain at a fixed annual amount. The amount of common dividends may fluctuate with the company’s profits. A company is under no legal obligation to pay preferred or common ___.

Answer 10

dividends

Question 11

Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time, thereby reducing the average cost paid per unit

Answer 11

dollar cost averaging

Question 12

Refers to the ___ of an investment. There is growing evidence that incorporating ___ factors into investment decisions can reduce risk and improve returns.

Answer 12

environmental, social, and governance (ESG)

Question 13

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.

Answer 13

ex-dividend

Question 14

The date that the shares start to trade ex-dividend

Answer 14

ex-dividend date

Question 15

An extra payment made in addition to a regular dividend payment

Answer 15

extra dividend

Question 16

Preferred shares that pay a fixed dividend for an initial five-year term after which, if not called by the issuer, shareholders have the option to continue receiving fixed-rate dividends that have been reset or receive a floating-rate preferred share.

Answer 16

fixed / floating preferred shares

Question 17

Pays a fixed quarterly dividend, typically expressed as an annual percentage of the issue price and have no stated maturity date. Like almost all Canadian preferred shares, however, issuers have the right to call or redeem fixed-rate perpetual preferred shares on established dates at prices set at the time of issue.

Answer 17

fixed-rate perpetual preferred shares

Question 18

Preferred shares with fixed dividend rates that periodically change or ‘reset’ according to a formula or process outlined at the time the shares are issued. There have been two broad types of fixed-reset preferred shares issued in Canada: rate-reset preferred shares and fixed / floating preferred shares.

Answer 18

fixed-reset preferred shares

Question 19

That part of the issued shares that are outstanding and available for trading by the public, and not held by company officers, directors, or investors who hold a controlling interest in the company. Also known as ___.

Answer 19

float, public float

Question 20

Dividend payments that fluctuate to reflect changes in interest rates. If interest rates rise, so will dividend payments, and vice versa.

Answer 20

floating-rate preferred shares

Question 21

With a hard retraction feature, the company must pay any redemption value in cash

Answer 21

hard retraction

Question 22

A preferred dividend that does not accrue or accumulate if unpaid

Answer 22

non-cumulative

Question 23

A number of shares which is less than a standard trading unit. Usually refers to a securities trade for less than 100 shares, sometimes called a broken lot. Trading in less than 100 shares typically incurs a higher per share commission.

Answer 23

odd lot

Question 24

A legal term meaning that all securities within a series have equal rank or claim on earnings and assets. Usually refers to equally ranking issues of a company’s preferred shares.

Answer 24

pari passu

Question 25

The degree of change over time based on a comparison between the beginning value and ending value

Answer 25

percentage changes

Question 26

In the case of a stock market index, a point change refers to the number of units of change in the index. For example, if the DJIA changes from 10,000 to 10,100, this would be referred to as a 100-point change.

Answer 26

point changes

Question 27

___ have an initial 5-year term during which shareholders are paid a fixed dividend rate based on the yield to maturity on the 5-year benchmark Government of Canada bond plus a spread. The spread represents the market’s view of the issuer’s credit worthiness at the time the preferred shares are issued, with a smaller spread indicating superior credit worthiness compared to a larger spread. At the end of the initial five-year term, and every five years thereafter, the issuer can call the shares for redemption at the initial offer price. If the issuer does not call the shares, shareholders have the option to keep the preferred share but with a dividend rate for the next five- year period reset to the current yield to maturity on the 5-year benchmark GoC bond plus the same spread that was used to determine the fixed rate during the initial five-year period, or exchange the fixed-rate preferred share for a floating-rate preferred share.

Answer 27

rate-reset preferred shares

Question 28

A term that indicates the amount a company usually pays on an annual basis

Answer 28

regular dividend

Question 29

Responsible investment refers to the incorporation of environmental, social and governance factors into the selection and management of investments

Answer 29

responsible investment

Question 30

Shares that participate in a company’s earnings and assets (in liquidation), as common shares do, but generally have restrictions on voting rights or else no voting rights

Answer 30

restricted shares

Question 31

A feature which can be included in a new debt or preferred issue, granting the holder the option under specified conditions to redeem the security on a stated date – prior to maturity in the case of a bond.

Answer 31

retractable or retraction

Question 32

Includes the 60 largest companies that trade on the TSX as measured by market capitalization and is broken down into 11 sectors that cover all S&P/TSX Index subgroups

Answer 32

S&P/TSX 60 Index

Question 33

A benchmark used to measure the performance of the broad Canadian equity market

Answer 33

S&P/TSX Composite Index

Question 34

A benchmark index for the public venture capital marketplace. Managed by Standard & Poor’s, it is a market capitalization-based index meant to provide an indication of performance for companies listed on the TSX Venture Exchange.

Answer 34

S&P/TSX Venture Composite Index

Question 35

A type of retractable preferred share where the redemption value may be paid in cash or in common shares, generally at the election of the issuer

Answer 35

soft retraction

Question 36

A regular trading unit which has uniformly been decided upon by the stock exchanges, in most cases it is 100 shares, but this can vary depending on the price of the stock

Answer 36

standard trading unit

Question 37

The arithmetic average of the current prices of a group of stocks designed to represent the overall market or some part of it

Answer 37

stock average

Question 38

A pro rata payment to common shareholders of additional common stock. Such payment increases the number of shares each holder owns but does not alter a shareholder’s proportional ownership of the company.

Answer 38

stock dividends

Question 39

A time series of numbers used to calculate a percentage change of this series over any period of time. Most stock indexes are value-weighted and are derived by using the total market value (i.e., market capitalization) of all stocks used in the index relative to a base period.

Answer 39

stock indexes

Question 40

An increase in a corporation’s number of shares outstanding without any change in the shareholders’ equity or market value. When a stock reaches
a high price making it illiquid or difficult to trade, management may split the stock to get the price into
a more marketable trading range. For example, an investor owns one standard trading unit of a stock that now trades at $70 each (portfolio value is $7,000). Management splits the stock 2:1. The investor would now own 200 new shares at a market value, all things being equal, of $35 each, for a portfolio value of $7,000.

Answer 40

stock split

Question 41

___ that are registered in the name of the securities firm, rather than the beneficial owner.

Answer 41

street certificate

Question 42

The stockholder’s right to vote in the affairs of the company. Most common shares have one vote each. Preferred stock usually has the right to vote only when its dividends are in arrears. The right to vote may be delegated by the shareholder to another person.

Answer 42

voting rights