P, Q

Question 1

Paper Profi t

Answer 1

An unrealized profit on a security still held.
Paper profits become realized profits only
when the security is sold. A paper loss is the
opposite to this.

Question 2

Par Value

Answer 2

The stated face value of a bond or stock (as
assigned by the company’s charter)
expressed as a dollar amount per share. Par
value of a common stock usually has little
relationship to the current market value and
so no par value stock is now more common.
Par value of a preferred stock is significant
as it indicates the dollar amount of assets
each preferred share would be entitled to
should the company be liquidated.

Question 3

Pari Passu

Answer 3

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

Question 4

Participating Preferred

Answer 4

Preferred shares which, in addition to their
fixed rate of prior dividend, share with the
common in further dividend distributions
and in capital distributions above their par
value in liquidation.

Question 5

Participation Rate

Answer 5

The share of the working-age population
(15 and older) that is in the labour market,
either working or looking for work.

Question 6

Partnership

Answer 6

A form of business organization that
involves two or more people contributing
to the business and legislated under the
federal Partnership Act.

Question 7

Past Service Pension Adjusted

PSPA

Answer 7

An employer may increase a member’s
pension by the granting of additional past
service benefits to an employee in a defined
benefit plan. Plan members who incur a
PSPA will have their RRSP contribution
room reduced by the amount of this
adjustment.

Question 8

Payback Period

Answer 8

The time that it takes for a convertible
security to recoup its premium through its
higher yield, compared with the dividend
that is paid on the stock

Question 9

Peer Group

Answer 9

A group of managed products (particularly
mutual funds) with a similar investment
mandate.

Question 10

Pension Adjustment (PA)

Answer 10

The amount of contributions made or the
value of benefits accrued to a member of an
employer-sponsored retirement plan for a
calendar year. The PA enables the individual
to determine the amount that may be
contributed to an RRSP that would be in
addition to contributions into a Registered
Pension Plan.

Question 11

Performance Bonds

Answer 11

What is often required upon entry into a
futures contract giving the parties to a
contract a higher level of assurance that the
terms of the contract will eventually be
honoured. The performance bond is often
referred to as margin

Question 12

Personal Disposable Income

Answer 12

The amount of personal income an
individual has after taxes. The income that
can be spent on necessities, nonessential
goods and services, or that can be saved.

Question 13

Phillips Curve

Answer 13

A graph showing the relationship between
inflation and unemployment. The theory
states that unemployment can be reduced
in the short run by increasing the price level
(inflation) at a faster rate. Conversely,
inflation can be lowered at the cost of
possibly increased unemployment and
slower economic growth.

Question 14

Point

Answer 14

Refers to security prices. In the case of
shares, it means $1 per share. In the case of
bonds and debentures, it means 1% of the
issue’s par value, which is almost universally
100. On a $1,000 bond, one point
represents 1% of the face value of the bond
or $10. See Basic point

Question 15

Political Risk

Answer 15

The risk associated with a government
introducing unfavourable policies making
investment in the country less attractive.
Political risk also refers to the general
instability associated with investing in a
particular country

Question 16

Pooled Account

Answer 16

A type of managed product structure
whereby by investors’ funds are gathered
into a legal structure, usually a trust or
corporation. An investor’s claim to the
pool’s returns is proportional to the number
of shares or units the investor owns. The
pools are often open-ended, which means
units are issued when there are net cash
inflows to the fund, or units are redeemed
when there are net cash outflows.

Question 17

Portfolio

Answer 17

Holdings of securities by an individual or
institution. A portfolio may contain debt
securities, preferred and common stocks of
various types of enterprises and other types
of securities.

Question 18

Potential Output

Answer 18

The maximum amount of output the 
economy is capable of producing during a 
given period when all of its available 
resources are employed to their most 
efficient use.

Question 19

Preferred Dividend Coverage Ratio

Answer 19

A type of profitability ratio that measures
the amount of money a firm has available
to pay dividends to their preferred
shareholders.

Question 20

Preferred Shares

Answer 20

A class of share capital that entitles the 
owners to a fixed dividend ahead of the 
company’s common shares and to a stated 
dollar value per share in the event of 
liquidation. Usually do not have voting 
rights unless a stated number of dividends 
have been omitted. Also referred to as 
preference shares.

Question 21

Preliminary Prospectus

Answer 21

The initial document released by an
underwriter of a new securities issue to
prospective investors.

Question 22

Premium

Answer 22

The amount by which a preferred stock or
debt security may sell above its par value.
In the case of a new issue of bonds or
stocks, the amount the market price rises
over the original selling price. Also refers to
that part of the redemption price of a bond
or preferred share in excess of face value,
par value or market price. In the case of
options, the price paid by the buyer of an
option contract to the seller.

Question 23

Prepaid Expenses

Answer 23

Payments made by the company for services 
to be received in the near future. For 
example, rents, insurance premiums and 
taxes are sometimes paid in advance. A 
statement of financial position item.

Question 24

Prepayment Risk

Answer 24

The risk that the issuer of a bond might
prepay or redeem early some or all principal
outstanding on the loan or mortgage.

Question 25

Prescribed Rate

Answer 25

A quarterly interest rate set out, or
prescribed by Canada Revenue Agency
under attribution rules. The rate is based
on the Bank of Canada rate.

Question 26

Present Value

Answer 26

The current worth of a sum of money that

will be received sometime in the future.

Question 27

Price-Earnings (P/E) Ratio

Answer 27

A value ratio that gives investors an idea of
how much they are paying for a company’s
earnings. Calculated as the current price of
the stock divided current earnings per
share.

Question 28

Primary Distribution or Primary

Offering of a New Issue

Answer 28

The original sale of any issue of a company’s

securities.

Question 29

Primary Market

Answer 29

The market for new issues of securities. The
proceeds of the sale of securities in a primary
market go directly to the company issuing
the securities. See also Secondary Market.

Question 30

Prime Rate

Answer 30

The interest rate chartered banks charge to

their most credit-worthy borrowers.

Question 31

Principal

Answer 31

The person for whom a broker executes an
order, or a dealer buying or selling for its
own account. The term may also refer to a
person’s capital or to the face amount of a
bond.

Question 32

Principal Protected Note

Answer 32

A debt-like instrument with a maturity date
whereby the issuer agrees to repay investors
the amount originally invested (the
principal) plus interest. The interest rate is
tied to the performance of an underlying
asset, such as a portfolio of mutual funds or
common stocks, a market index, a hedge
fund or a portfolio of hedge funds. PPNs
guarantee only the return of the principal.

Question 33

Private Equity

Answer 33

The financing of firms unwilling or unable
to find capital using public means—for
example, via the stock or bond markets.

Question 34

Private Family Offi ce

Answer 34

An extension of the advisor’s client servicing
approach. In this approach, instead of
having only one advisor, a team of
professionals handles all of an affluent
client’s financial affairs within one central
location.

Question 35

Private Placement

Answer 35

The underwriting of a security and its sale
to a few buyers, usually institutional, in
large amounts.

Question 36

Pro Rata

Answer 36

In proportion to. For example, a dividend
is a pro rata payment because the amount
of dividend each shareholder receives is in
proportion to the number of shares he or
she owns.

Question 37

Probate

Answer 37

A provincial fee charged for authenticating
a will. The fee charged is usually based on
the value of the assets in an estate rather
than the effort to process the will.

Question 38

Productivity

Answer 38

The amount of output per worker used as a
measure of efficiency with which people
and capital are combined in the output of
the economy. Productivity gains lead to
improvements in the standard of living,
because as labour, capital, etc. produce
more, they generate greater income.

Question 39

Profit

Answer 39

That part of a company’s revenue remaining
after all expenses and taxes have been paid
and out of which dividends may be paid.

Question 40

Profitability Ratios

Answer 40

Financial ratios that illustrate how well
management has made use of the company’s
resources

Question 41

Program Trading

Answer 41

A sophisticated computerized trading
strategy whereby a portfolio manager
attempts to earn a profit from the price
spreads between a portfolio of equities
similar or identical to those underlying a
designated stock index, e.g., the Standard
& Poor 500 Index, and the price at which
futures contracts (or their options) on the
index trade in financial futures markets.
Also refers to switching or trading blocks of
securities in order to change the asset mix
of a portfolio.

Question 42

Prospectus

Answer 42

A legal document that describes securities
being offered for sale to the public. Must be
prepared in conformity with requirements
of applicable securities commissions. See
also Red Herring and Final Prospectus.

Question 43

Proxy

Answer 43

Written authorization given by a shareholder
to someone else, who need not be a
shareholder, to represent him or her and
vote his or her shares at a shareholders’
meeting.

Question 44

Prudent Portfolio Approach

Answer 44

An investment standard. In some provinces,
the law requires that a fi duciary, such as a
trustee, may invest funds only in a list of
securities designated by the province or the
federal government. In other provinces, the
trustee may invest in a security if it is one
that an ordinary prudent person would buy
if he were investing for the benefi t of other
people for whom he felt morally bound to
provide. Most provinces apply the two
standards

Question 45

Public Float

Answer 45

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. A
company’s public fl oat is different from its
outstanding shares as it also excludes those
shares owned in large blocks by institutions.

Question 46

Purchase Fund

Answer 46

A fund set up by a company to retire
through purchases in the market a specified
amount of its outstanding preferred shares
or debt if purchases can be made at or
below a stipulated price. See also Sinking
Fund.

Question 47

Put Option

Answer 47

A right to sell the stock at a stated price
within a given time period. Those who
think a stock may go down generally
purchase puts. See also Call Option

Question 48

Quick Ratio

Answer 48

A more stringent measure of liquidity
compared with the current ratio.
Calculated as current assets less inventory
divided by current liabilities. By excluding
inventory, the ratio focuses on the
company’s more liquid assets.

Question 49

Quotation or Quote

Answer 49

The highest bid to buy and the lowest offer
to sell a security at a given time. Example:
A quote of 45.40–45.50 means that 45.40
is the highest price a buyer will pay and
45.50 the lowest price a seller will accept.

Question 50

Quotation and Trade Reporting

Systems (QTRS)

Answer 50

Recognized stock markets that operate in a
similar manner to exchanges and provide
facilities to users to post quotations and
report trades