D

Question 1

Day Order

Answer 1

A buy or sell order that automatically expires
if it is not executed on the day it is entered.
All orders are day orders unless otherwise
specified.

Question 2

Dealer Market

Answer 2

A market in which securities are bought
and sold over-the-counter in which dealers
acts as principals when buying and selling
securities for clients. Also referred to as the
unlisted market.

Question 3

Dealer Member

Answer 3

A stock brokerage fi rm or investment dealer
which is a member of a stock exchange or
the Investment Industry Regulatory
Organization of Canada

Question 4

Dealer’s Spread

Answer 4

The difference between the bid and ask

prices on a security

Question 5

Death Benefi t

Answer 5

The amount that a segregated fund policy
pays to the beneficiary or the estate when
the market value of the segregated fund is
lower than the guaranteed amount on the
death of the annuitant.

Question 6

Debenture

Answer 6

A certificate of indebtedness of a government
or company backed only by the general
credit of the issuer and unsecured by
mortgage or lien on any specific asset. In
other words, no specific assets have been
pledged as collateral.

Question 7

Debt

Answer 7

Money borrowed from lenders for a variety
of purposes. The borrower typically pays
interest for the use of the money and is
obligated to repay it at a set date.

Question 8

Debt/Equity Ratio

Answer 8

A ratio that shows whether a company’s
borrowing is excessive. The higher the ratio,
the higher the fi nancial risk

Question 9

Declining Industry

Answer 9

An industry moving from the maturity
stage. It tends to grow at rates slower than
the overall economy, or the growth rate
actually begins to decline

Question 10

Deemed Disposition

Answer 10

Under certain circumstances, taxation rules
state that a transfer of property has occurred,
even without a purchase or sale, e.g., there
is a deemed disposition on death or
emigration from Canada

Question 11

Default

Answer 11

A bond is in default when the borrower has
failed to live up to its obligations under the
trust deed with regard to interest, sinking
fund payments or has failed to redeem the
bonds at maturity

Question 12

Default Risk

Answer 12

The risk that a debt security issuer will be
unable to pay interest on the prescribed
date or the principal at maturity. Default
risk applies to debt securities not equities
since equity dividend payments are not
contractual.

Question 13

Defensive Stock

Answer 13

A stock of a company with a record of
stable earnings and continuous dividend
payments and which has demonstrated
relative stability in poor economic
conditions. For example, utility stock
values do not usually change from periods
of expansion to periods of recession since
most individuals use a constant amount of
electricity

Question 14

Deferred Annuity

Answer 14

This type of contract, usually sold by life
insurance companies, pays a regular stream
of income to the beneficiary or annuitant
at some agreed-upon start date in the future.
The original payment is usually a stream of
payments made over time, ending prior to
the beginning of the annuity payments. See
also Annuity.

Question 15

Deferred Preferred Shares

Answer 15

A type of preferred share that pays no

dividend until a future maturity date.

Question 16

Deferred Sales Charge

Answer 16

The fee charged by a mutual fund or
insurance company for redeeming units. It
is otherwise known as a redemption fee or
back-end load. These fees decline over
time and are eventually reduced to zero if
the fund is held long enough.

Question 17

Deferred Tax Liabilities

Answer 17

The income tax payable in future periods.
These liabilities commonly result from
temporary differences between the book
value of assets and liabilities as reported on
the statement of fi nancial position and the
amount attributed to that asset or liability
for income tax purposes

Question 18

Defi ned Benefi t Plan

Answer 18

A type of registered pension plan in which
the annual payout is based on a formula.
The plan pays a specific dollar amount at
retirement using a predetermined formula.

Question 19

Defi ned Contribution Plan

Answer 19

A type of registered pension plan where the
amount contributed is known but the dollar
amount of the pension to be received is
unknown. Also known as a money purchase
plan

Question 20

Delayed Floater

Answer 20

A type of variable rate preferred share that
entitles the holder to a fixed dividend for a
predetermined period of time after which
the dividend becomes variable. Also known
as a fixed-reset or fixed floater.

Question 21

Delayed Opening

Answer 21

Postponement in the opening of trading of
a security the result of a heavy influx of buy
and/or sell orders.

Question 22

Delisting

Answer 22

Removal of a security’s listing on a stock

exchange.

Question 23

Demand Pull Infl ation

Answer 23

A type of inflation that develops when
continued consumer demand pushes prices
higher.

Question 24

Depletion

Answer 24

Refers to consumption of natural resources
that are part of a company’s assets. Producing
oil, mining and gas companies deal in
products that cannot be replenished and as
such are known as wasting assets. The
recording of depletion is a bookkeeping
entry similar to depreciation and does not
involve the expenditure of cash.

Question 25

Depreciation

Answer 25

Systematic charges against earnings to write
off the cost of an asset over its estimated
useful life because of wear and tear through
use, action of the elements, or obsolescence.
It is a bookkeeping entry and does not
involve the expenditure of cash.

Question 26

Derivative

Answer 26

A type of fi nancial instrument whose value
is based on the performance of an underlying
fi nancial asset, commodity, or other
investment. Derivatives are available on
interest rates, currency, stock indexes. For
example, a call option on IBM is a
derivative because the value of the call
varies in relation to the performance of
IBM stock. See also Options

Question 27

Direct Bonds

Answer 27

This term is used to describe bonds issued
by governments that are firsthand obligations
of the government itself. See also
Guaranteed Bonds.

Question 28

Directional Hedge Funds

Answer 28

A type of hedge fund that places a bet on
the anticipated movements in the market
prices of equities, fi xed-income securities,
foreign currencies and commodities

Question 29

Director

Answer 29

Person elected by voting common
shareholders at the annual meeting to direct
company policies.

Question 30

Directors’ Circular

Answer 30

Information sent to shareholders by the
directors of a company that are the target
of a takeover bid. A recommendation to
accept or reject the bid, and reasons for this
recommendation, must be included.

Question 31

Disclosure

Answer 31

One of the principles of securities regulation
in Canada. This principle entails full, true
and plain disclosure of all material facts
necessary to make reasoned investment
decisions

Question 32

Discount

Answer 32

The amount by which a preferred stock or

bond sells below its par value

Question 33

Discount Brokers

Answer 33

Brokerage house that buys and sells securities
for clients at a greater commission discount
than full-service fi rms

Question 34

Discount Rate

Answer 34

In computing the value of a bond, the
discount rate is the interest rate used in
calculating the present value of future cash
fl ows

Question 35

Discouraged Workers

Answer 35

Individuals that are available and willing to
work but cannot find jobs and have not
made specific efforts to find a job within
the previous month.

Question 36

Discretionary Account

Answer 36

A securities account where the client has
given specific written authorization to a
partner, director or qualified portfolio
manager to select securities and execute
trades for him. See also Managed Account
and Wrap Account.

Question 37

Disinfl ation

Answer 37

A decline in the rate at which prices rise –
i.e., a decrease in the rate of inflation. Prices
are still rising, but at a slower rate.

Question 38

Disposable Income

Answer 38

Personal income minus income taxes and

any other transfers to government.

Question 39

Diversifi cation

Answer 39

Spreading investment risk by buying
different types of securities in different
companies in different kinds of businesses
and/or locations.

Question 40

Dividend

Answer 40

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
dividends.

Question 41

Dividend Discount Model

Answer 41

The relationship between a stock’s current
price and the present value of all future
dividend payments. It is used to determine
the price at which a stock should be selling
based on projected future dividend
payments.

Question 42

Dividend Payout Ratio

Answer 42

A ratio that measures the amount or
percentage of the company’s profit that are
paid out to shareholders in the form of
dividends.

Question 43

Dividend Reinvestment Plan

Answer 43

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

Question 44

Dividend Tax Credit

Answer 44

A procedure to encourage Canadians to
invest in preferred and common shares of
taxable, dividend-paying Canadian
corporations. The taxpayer pays tax based
on grossing up (i.e., adding 4 5% to the
amount of dividends actually received) and
obtains a credit against federal and
provincial tax based on the grossed up
amount in the amount of 19%.

Question 45

Dividend Yield

Answer 45

A value ratio that shows the annual
dividend rate expressed as a percentage of
the current market price of a stock. Dividend
yield represents the investor’s percentage
return on investment at its prevailing
market price.

Question 46

Dollar Cost Averaging

Answer 46

Investing a fi xed amount of dollars in a
specifi c security at regular set intervals over
a period of time, thereby reducing the
average cost paid per unit

Question 47

Domestic Bonds

Answer 47

Bonds issued in the currency and country
of the issuer. For example, a Canadian
dollar-denominated bond, issued by a
Canadian company, in the Canadian market
would be considered a domestic bond.

Question 48

Dow Jones Industrial Average

(DJIA

Answer 48

A price-weighted average that uses 30
actively traded blue chip companies as a
measure of the direction of the New York
Stock Exchange.

Question 49

Drawdown

Answer 49

A cash management open-market operation
pursued by the Bank of Canada to infl uence
interest rates. A drawdown refers to the
transfer of deposits to the Bank of Canada
from the direct clearers, effectively draining
the supply of available cash balances. See
also Redeposit

Question 50

Due Diligence Report

Answer 50

When negotiations for a new issue of 
securities begin between a dealer and 
corporate issuer, the dealer normally 
prepares a due diligence report examining 
the financial structure of the company.

Question 51

Duration

Answer 51

A measure of bond price volatility. The
approximate percentage change in the price
or value of a bond or bond portfolio for a
1% point change in interest rates. The
higher the duration of a bond the greater its
risk

Question 52

Dynamic Asset Allocation

Answer 52

An asset allocation strategy that refers to
the systematic rebalancing, either by time
period or weight, of the securities in the
portfolio, so that they match the long-term
benchmark asset mix among the various
asset classes