CSC (Canadian Securities & Investment) cheat sheet

Real return ≈ nominal return − inflation; the Fisher equation states (1 + nominal) = (1 + real)(1 + inflation).

Holding period return = (ending value − beginning value + income) ÷ beginning value; it ignores the timing of interim cash flows.

Sharpe ratio = (portfolio return − risk-free rate) ÷ standard deviation of portfolio returns; it measures excess return per unit of total risk.

Treynor ratio = (portfolio return − risk-free rate) ÷ beta; it measures excess return per unit of systematic risk.

CAPM: expected return = risk-free rate + beta × (market return − risk-free rate); beta measures sensitivity to market movements.

Duration approximates a bond's percentage price change for a 1% change in yield; modified duration = Macaulay duration ÷ (1 + yield per period).

Bid-ask spread is a transaction cost paid to immediacy; a market order crosses the spread, a limit order may not execute.

Time-weighted return removes the effect of external cash flows and is the standard for judging manager performance; money-weighted return reflects investor timing.

The financial planning process: establish relationship, gather data and goals, analyse, develop recommendations, implement, monitor and review.

Emergency fund target is typically 3–6 months of essential expenses, held in liquid, low-volatility assets.

Term life insurance pays a death benefit only if the insured dies during the policy term; it has no cash value.

Whole life insurance combines permanent death benefit with cash value; it is subject to surrender charges and may lapse if premiums are unpaid.

Disability insurance replaces a portion of income, commonly 50–70%, after an elimination period; own-occupation definitions are the most favourable to the insured.

Insurance principle of indemnity: the insured is restored to the pre-loss financial position, not better off; it limits moral hazard.

Life insurance need via the needs approach = income replacement + debts + education + final expenses − existing resources.

RRSP contributions are tax-deductible and growth is tax-deferred; withdrawals are taxed as income, and unused room carries forward.

Know-your-client (KYC) and suitability assessment are prerequisites before any recommendation; risk tolerance and time horizon drive asset allocation.

Asset allocation explains the majority of return variability across portfolios; security selection is secondary.

Taxable accounts favour capital gains and dividends; registered accounts favour interest-bearing income because it is fully taxed when held outside.

Estate planning tools: will, power of attorney, beneficiary designations, trusts; beneficiary designations on registered plans generally bypass the will.

A trust separates legal title from beneficial enjoyment; it can provide control, creditor protection, and probate avoidance.

Concentrated single-stock positions carry idiosyncratic risk that is unrewarded; diversification reduces unsystematic risk, not systematic risk.

Private banking clients are segmented by investable assets; service tiers typically add credit, custody, and discretionary portfolio management.

Rebalancing back to target weights enforces a sell-high/buy-low discipline and controls drift in portfolio risk.

Simple interest = principal × rate × time; compound interest = principal × (1 + rate ÷ compounding periods)^(periods × years) − principal.

Annual percentage rate (APR) ignores compounding; effective annual rate (EAR) = (1 + APR ÷ n)^n − 1, where n is compounding periods per year.

Loan amortisation: early payments are mostly interest, later payments mostly principal; the payment is fixed but the interest/principal split changes.

Rule of 72: years to double ≈ 72 ÷ annual percentage growth rate; it is an approximation that is more accurate at low rates.

Deposit insurance protects eligible deposits up to a set limit per depositor per institution; it does not cover mutual funds or stocks.

Mortgage qualifying uses gross debt service (GDS) and total debt service (TDS) ratios; TDS includes all debt payments, GDS only housing costs.

A line of credit is revolving with interest-only minimum payments; a term loan is amortised with a fixed repayment schedule.

Chequing accounts serve transactions with low or no interest; savings accounts pay interest but limit withdrawals or transfers.

Real return ≈ nominal return − inflation; the Fisher equation states (1 + nominal) = (1 + real)(1 + inflation).

Holding period return = (ending value − beginning value + income) ÷ beginning value; it ignores the timing of interim cash flows.

Sharpe ratio = (portfolio return − risk-free rate) ÷ standard deviation of portfolio returns; it measures excess return per unit of total risk.

Treynor ratio = (portfolio return − risk-free rate) ÷ beta; it measures excess return per unit of systematic risk.

CAPM: expected return = risk-free rate + beta × (market return − risk-free rate); beta measures sensitivity to market movements.

Duration approximates a bond's percentage price change for a 1% change in yield; modified duration = Macaulay duration ÷ (1 + yield per period).

Bid-ask spread is a transaction cost paid to immediacy; a market order crosses the spread, a limit order may not execute.

Time-weighted return removes the effect of external cash flows and is the standard for judging manager performance; money-weighted return reflects investor timing.

The financial planning process: establish relationship, gather data and goals, analyse, develop recommendations, implement, monitor and review.

Emergency fund target is typically 3–6 months of essential expenses, held in liquid, low-volatility assets.

Term life insurance pays a death benefit only if the insured dies during the policy term; it has no cash value.

Whole life insurance combines permanent death benefit with cash value; it is subject to surrender charges and may lapse if premiums are unpaid.

Disability insurance replaces a portion of income, commonly 50–70%, after an elimination period; own-occupation definitions are the most favourable to the insured.

Insurance principle of indemnity: the insured is restored to the pre-loss financial position, not better off; it limits moral hazard.

Life insurance need via the needs approach = income replacement + debts + education + final expenses − existing resources.

RRSP contributions are tax-deductible and growth is tax-deferred; withdrawals are taxed as income, and unused room carries forward.

Know-your-client (KYC) and suitability assessment are prerequisites before any recommendation; risk tolerance and time horizon drive asset allocation.

Asset allocation explains the majority of return variability across portfolios; security selection is secondary.

Taxable accounts favour capital gains and dividends; registered accounts favour interest-bearing income because it is fully taxed when held outside.

Estate planning tools: will, power of attorney, beneficiary designations, trusts; beneficiary designations on registered plans generally bypass the will.

A trust separates legal title from beneficial enjoyment; it can provide control, creditor protection, and probate avoidance.

Concentrated single-stock positions carry idiosyncratic risk that is unrewarded; diversification reduces unsystematic risk, not systematic risk.

Private banking clients are segmented by investable assets; service tiers typically add credit, custody, and discretionary portfolio management.

Rebalancing back to target weights enforces a sell-high/buy-low discipline and controls drift in portfolio risk.

Simple interest = principal × rate × time; compound interest = principal × (1 + rate ÷ compounding periods)^(periods × years) − principal.

Annual percentage rate (APR) ignores compounding; effective annual rate (EAR) = (1 + APR ÷ n)^n − 1, where n is compounding periods per year.

Loan amortisation: early payments are mostly interest, later payments mostly principal; the payment is fixed but the interest/principal split changes.

Rule of 72: years to double ≈ 72 ÷ annual percentage growth rate; it is an approximation that is more accurate at low rates.

Deposit insurance protects eligible deposits up to a set limit per depositor per institution; it does not cover mutual funds or stocks.

Mortgage qualifying uses gross debt service (GDS) and total debt service (TDS) ratios; TDS includes all debt payments, GDS only housing costs.

A line of credit is revolving with interest-only minimum payments; a term loan is amortised with a fixed repayment schedule.

Chequing accounts serve transactions with low or no interest; savings accounts pay interest but limit withdrawals or transfers.