Canadian Securities (CSC) Test #1 with
Complete Solutions
"Know your client" rule - ANSWER-salespersons must use diligence to learn essential
facts about the client (including every account and order) before entering into the
relationship, in order to make appropriate decisions for the client.
Accrued interest - ANSWER-Interest that has built up but has not yet been paid. Pay
both the stated asking price for the bond + Interest from the previous period.
Stated asking price x [Coupon rate x (term/365)]
After-market stabilization - ANSWER-a type of arrangement where the dealer supports
the offer price of a newly issued stock once it begins trading in the secondary market.
Auction market - ANSWER-market in which securities are bought and sold by brokers
acting as agents for their clients (stock exchanges).
Authorized shares - ANSWER-the maximum number of shares a corporation may issue
as indicated in the corporate charter.
Back office - ANSWER-in charge of settlements and clearing.
Bank rate - ANSWER-the upper limit of the overnight operating interest rate band.
Banker's Acceptance - ANSWER-a short-term commercial draft sold at a discount
(similar to a T-bill).
Bond selling at a discount - ANSWER-If bond price is less than $1000.
YTM > Coupon Rate
Bond selling at a premium - ANSWER-If bond price is greater than $1000.
YTM < Coupon Rate
Bought deal - ANSWER-when one dealer buys the entire issue and acts as a principal.
Can take a lower spread (between the dealer's cost and the final selling price).
Bourse de Montreal (Montreal Exchange) - ANSWER-where all options and futures in
Canada are traded.
Buy-in - ANSWER-the obligation to buy back the stock after selling it short. Becomes
effective if adequate margin cannot be maintained.
, Canada Savings Bonds (CSBs) - ANSWER-a type of savings product that pays a
competitive rate of interest and that is guaranteed for one or more years. They may be
cashed at any time and, after the first three months, pay interest up to the end of the
month prior to being cashed.
Capital and financial account - ANSWER-includes the financial flows between
Canadians and foreigners (selling assets or borrowing funds to deal with surplus/deficit).
Capitalization - ANSWER-recording an expenditure as an asset rather than an expense
so that it can be spread over more than 1 accounting period (placed on the B/S)
CDIC (Canadian Deposit Insurance Corporation) - ANSWER-a federal Crown
Corporation providing deposit insurance against loss (up to $100,000 per depositor)
when a member institution fails.
CIPF (Canadian Investor Protection Fund) - ANSWER-a fund that protects eligible
customers in the event of the insolvency of an IIROC dealer member.
General acct. = $1M total
Separate acct. = $1M each
Coincident indicators - ANSWER-change at the same time as the market - GDP.
Commercial Paper - ANSWER-a short-term corporate money market security.
Common share advantages - ANSWER-- Potential for capital appreciation
- Dividends
- Favourable tax rate
- Voting rights
- Limited liability
- Marketability
Competitive bidding - ANSWER-a selection process in which suppliers submit bids to
win the buyer's business. The submitted bids are accepted in rising order of yield until
the full amount has been allocated.
Competitive tender - ANSWER-a distribution method used in particular by the Bank of
Canada in distributing new issues of government marketable bonds. Bids are requested
from primary distributors and the higher bids are awarded the securities for distribution.
Confirmation - ANSWER-the document that a dealer sends to the client when a
transaction is made (at the latest, by the next day).
Contraction - ANSWER-when economic activity declines, profits decline, spending
declines, and saving increases.
Complete Solutions
"Know your client" rule - ANSWER-salespersons must use diligence to learn essential
facts about the client (including every account and order) before entering into the
relationship, in order to make appropriate decisions for the client.
Accrued interest - ANSWER-Interest that has built up but has not yet been paid. Pay
both the stated asking price for the bond + Interest from the previous period.
Stated asking price x [Coupon rate x (term/365)]
After-market stabilization - ANSWER-a type of arrangement where the dealer supports
the offer price of a newly issued stock once it begins trading in the secondary market.
Auction market - ANSWER-market in which securities are bought and sold by brokers
acting as agents for their clients (stock exchanges).
Authorized shares - ANSWER-the maximum number of shares a corporation may issue
as indicated in the corporate charter.
Back office - ANSWER-in charge of settlements and clearing.
Bank rate - ANSWER-the upper limit of the overnight operating interest rate band.
Banker's Acceptance - ANSWER-a short-term commercial draft sold at a discount
(similar to a T-bill).
Bond selling at a discount - ANSWER-If bond price is less than $1000.
YTM > Coupon Rate
Bond selling at a premium - ANSWER-If bond price is greater than $1000.
YTM < Coupon Rate
Bought deal - ANSWER-when one dealer buys the entire issue and acts as a principal.
Can take a lower spread (between the dealer's cost and the final selling price).
Bourse de Montreal (Montreal Exchange) - ANSWER-where all options and futures in
Canada are traded.
Buy-in - ANSWER-the obligation to buy back the stock after selling it short. Becomes
effective if adequate margin cannot be maintained.
, Canada Savings Bonds (CSBs) - ANSWER-a type of savings product that pays a
competitive rate of interest and that is guaranteed for one or more years. They may be
cashed at any time and, after the first three months, pay interest up to the end of the
month prior to being cashed.
Capital and financial account - ANSWER-includes the financial flows between
Canadians and foreigners (selling assets or borrowing funds to deal with surplus/deficit).
Capitalization - ANSWER-recording an expenditure as an asset rather than an expense
so that it can be spread over more than 1 accounting period (placed on the B/S)
CDIC (Canadian Deposit Insurance Corporation) - ANSWER-a federal Crown
Corporation providing deposit insurance against loss (up to $100,000 per depositor)
when a member institution fails.
CIPF (Canadian Investor Protection Fund) - ANSWER-a fund that protects eligible
customers in the event of the insolvency of an IIROC dealer member.
General acct. = $1M total
Separate acct. = $1M each
Coincident indicators - ANSWER-change at the same time as the market - GDP.
Commercial Paper - ANSWER-a short-term corporate money market security.
Common share advantages - ANSWER-- Potential for capital appreciation
- Dividends
- Favourable tax rate
- Voting rights
- Limited liability
- Marketability
Competitive bidding - ANSWER-a selection process in which suppliers submit bids to
win the buyer's business. The submitted bids are accepted in rising order of yield until
the full amount has been allocated.
Competitive tender - ANSWER-a distribution method used in particular by the Bank of
Canada in distributing new issues of government marketable bonds. Bids are requested
from primary distributors and the higher bids are awarded the securities for distribution.
Confirmation - ANSWER-the document that a dealer sends to the client when a
transaction is made (at the latest, by the next day).
Contraction - ANSWER-when economic activity declines, profits decline, spending
declines, and saving increases.
