P, Q

Question 1

Par value

Answer 1

The stated face value of a bond or stock (as
assigned by the company’s charter)
expressed as a dollar amount per bond or
share. The par value of a common share has
little relationship to the current market
value or the amount a shareholder may
receive if the company was to be liquidated,
and so many common shares are issued
without par value. The par value of a
preferred share is significant as it indicates
the dollar amount of assets each preferred
share is entitled to should the company be
liquidated. See also Preferred share and
Principal.

Question 2

Parallel shift of the yield curve

Answer 2

An approximately equal increase or decrease
in the yields of debt securities at all
maturities. See also Yield curve, Yield
curve hump, and Yield curve twist.

Question 3

Passive investment strategy

Answer 3

An investment strategy that does not use
expectations about individual securities to
build a portfolio. The most popular passive
investment strategy is indexing. See also
Buy-and-hold, Indexing, Investment
strategy, and Active investment strategy.

Question 4

Passively managed fund

Answer 4

A managed product whose manager makes 
investment decisions based on some criteria 
other than his or her outlook for the 
markets and securities. The most common 
form of passive management is indexing. 
See also Actively managed fund.

Question 5

Peer group

Answer 5

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

Question 6

Performance evaluation

Answer 6

The appraisal of a portfolio’s performance
over the evaluation period. See also
Evaluation period

Question 7

Performance fee

Answer 7

See Incentive fee

Question 8

Performance measurement

Answer 8

The calculation of the return realized by a
portfolio over the evaluation period. See
also Evaluation period.

Question 9

Periodic Cash Flow

Answer 9

A client’s income needs during retirement.

Question 10

Pioneering stage

Answer 10

The first stage of the industry life cycle.
This stage is characterized by high but
volatile growth rates.

Question 11

Planning stage

Answer 11

The first stage of the investment
management process encompassing three
steps: determine investment objectives and
constraints; create an investment policy
statement; and establish a strategic asset
allocation. See also Execution stage and
Feedback stage

Question 12

Policy return

Answer 12

The return on the portfolio based on the
strategic asset allocation decision. The
return on each asset class benchmark is
weighted by its contribution to the strategic
asset allocation.

Question 13

Pool factor

Answer 13

The percentage of original principal
remaining in a pool of mortgages backing a
mortgage-backed security. See also
Mortgage-back security

Question 14

Portfolio rebalancing

Answer 14

Rebalancing the portfolio to the long-term,
strategic asset mix. Also known as Dynamic
asset allocation

Question 15

Portfolio strategist

Answer 15

See Investment strategist.

Question 16

Portfolio turnover

Answer 16

Is roughly defined as the total value of
securities bought and sold in relation to the
overall net assets of the portfolio.

Question 17

Potential rate of growth

Answer 17

The rate at which an economy should grow
when all resources (labour and capital) are
fully utilized.

Question 18

Preferred securities

Answer 18

A type of capital security that resembles a
preferred share because it has a $25 par
value and is traded on a stock exchange. See
also Capital securities and Capital trust
security.

Question 19

Prepayment risk

Answer 19

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

Question 20

Present value

Answer 20

A sum of money in hand, or the current
value of a sum of money that will be
received sometime in the future. See also
Future value and Time value of money.

Question 21

Price bands

Answer 21

A pair of lines graphed above and below the
price or a moving average of the price. The
lines are used to indicate support and
resistance levels. See also Bollinger bands
and Moving average envelopes.

Question 22

Price discovery

Answer 22

The process of determining the prices of
assets in the marketplace through the
interactions of buyers and sellers

Question 23

Principal

Answer 23

The amount that an issuer of debt securities
must repay to investors. This usually occurs
on the maturity date, but partial
repayments can occur prior to maturity.
Also known as the face value or par value.
See also Par value, Amortization schedule
and Maturity date.

Question 24

Principal-protected note (PPN)

Answer 24

A debt-like instrument with a maturity date
on which the issuer agrees to repay investors
the amount originally lent (the principal).
In addition to the principal, investors may
receive interest, the rate of which is tied to
the performance of an underlying asset.

Question 25

Pro cyclical indicator

Answer 25

An indicator or variable that tends to move

in tandem with the economic cycle

Question 26

Probing

Answer 26

Using statements that require the client to

respond with information.

Question 27

Producer Price Index (PPI)

Answer 27

A family of U.S. indexes that indicate price
changes received by producers of goods and
services

Question 28

Product differentiation

Answer 28

A barrier to entry that limits the success of
a competing product or service due to a
lack of brand recognition.

Question 29

Projected financial statements

Answer 29

A set of forecasted financial statements.

Question 30

Protective put

Answer 30

A long position in an underlying asset and

a long put option on the underlying asset.

Question 31

Proxy

Answer 31

A document that provides shareholders 
with information on company matters to be 
voted on and a form to register his or her 
vote. It also allows a shareholder to 
authorize others, usually the company’s 
management, to vote on behalf of the 
shareholder in the manner that the 
shareholder has indicated, without the 
shareholder being present

Question 32

Public short ratio

Answer 32

A contrarian indicator based on data
published by stock exchanges. The ratio is
equal to the total number of short sales of
the public by the total short sales. See also
Contrarian indicator.

Question 33

Purchase fund

Answer 33

An agreement in a debt security’s indenture
that the issuer will set aside a specified
amount of funds to retire some or all of the
outstanding debt security, but only if the
market price of the security is below a
stated threshold, usually par. See also
Sinking fund.

Question 34

Pure fundamental approach

Answer 34

A bottom-up approach to active equity
investing that involves an analysis of a
company’s historical and projected financial
performance and valuation. See also
Non-style-based approach, Pure
quantitative approach, and Pure technical
approach.

Question 35

Pure play

Answer 35

A reference to a commodity-producing
company’s operation whose revenues are
100% dependent on the production of the
raw commodity itself.

Question 36

Pure quantitative approach

Answer 36

A bottom-up approach to active equity
investing that combines historical fundamental data (earnings, cash flow, book
value, etc.) with statistical analysis using
computer-based models to identify the best
stocks according to pre-specified criteria.
See also Non-style-based approach, Pure
fundamental approach, and Pure
technical approach.

Question 37

Pure technical approach

Answer 37

A bottom-up approach to active equity
investing that assumes that all known
market influences are fully reflected in
market prices, and that nothing is to be
gained by conducting fundamental analysis.
Investment decisions are made by analyzing
historical market action to determine
probable future price trends. See also
Non-style-based approach, Pure
fundamental approach, and Pure
technical approach.

Question 38

Put/call ratio

Answer 38

A contrarian indicator that compares the
number of put options traded during a
session with the number of call options. See
also Contrarian indicator.

Question 39

Putable bond

Answer 39

See Redeemable bond.

Question 40

Quality spread theory

Answer 40

A theory that attempts to explain the
behaviour of credit spreads. According to
the theory, credit spreads narrow during
economic upturns, and widen during
economic downturns. See also Credit
spread and Flight to quality.

Question 41

Quantitative analyst

Answer 41

An analyst who combines historical
fundamental data with statistical analyses
using computer- based models to identify
the best stocks according to pre-specified
criteria. See also Economist, Equity
analyst, Investment strategist, and
Technical analyst.

Question 42

Quartile

Answer 42

The division of mutual funds into four
approximately equal-sized groups based on
performance. The first or top quartile
contains the funds with performance in the
top quarter of all funds in the group, the
second quarter contains the funds with
performance in the next quarter, and so. See
also Quartile ranking

Question 43

Quartile ranking

Answer 43

A method of ranking a mutual fund’s
performance relative to its peer group. See
also Mutual fund, Peer group, and
Quartile