CSC (Canadian Securities & Investment) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Holding Period Return

Total return over a period: (ending value − beginning value + income received) ÷ beginning value. It ignores the timing of interim cash flows, so it can misstate performance when contributions or withdrawals occur.

Sharpe Ratio

Excess portfolio return over the risk-free rate divided by the portfolio's standard deviation. It measures return earned per unit of total risk, both systematic and unsystematic.

Beta

A measure of a security's sensitivity to market movements. A beta of 1 moves with the market; above 1 is more volatile, below 1 less volatile, and negative moves opposite the market.

Modified Duration

Macaulay duration divided by (1 + yield per period). It approximates the percentage change in a bond's price for a 1% change in yield, assuming a parallel shift.

Limit Order

An order to buy or sell at a specified price or better. It guarantees price but not execution, unlike a market order, which guarantees execution but not price.

Time-Weighted Return

A return calculation that removes the effect of external cash flows by linking sub-period returns. It is the standard measure for evaluating investment manager skill.

Systematic Risk

Market-wide risk that cannot be eliminated through diversification, such as interest rate or recession risk. It is measured by beta and is compensated with expected return.

Asset Allocation

The division of a portfolio among asset classes such as equities, bonds, and cash. It is the primary driver of long-term return variability and portfolio risk.

Financial Planning Process

A six-step sequence: establish the relationship, gather data and goals, analyse the situation, develop recommendations, implement the plan, then monitor and review it periodically.

Term Life Insurance

Coverage that pays a death benefit only if the insured dies within a specified period. It has no cash value and is typically the lowest-cost way to buy pure protection.

Whole Life Insurance

Permanent coverage combining a death benefit with a cash value that grows tax-deferred. Surrender charges and lapse risk apply if premiums are not maintained.

Elimination Period

The waiting time after a disability begins before benefit payments start. Longer elimination periods reduce premiums because short-term claims are excluded.

Principle of Indemnity

The insured is restored to the approximate pre-loss financial position, never better off. This principle limits moral hazard and over-insurance.

Emergency Fund

Liquid reserves covering roughly three to six months of essential expenses, held in low-volatility, accessible accounts to absorb income shocks without forced asset sales.

RRSP

A registered retirement savings plan: contributions are tax-deductible, growth is tax-deferred, and withdrawals are taxed as income. Unused contribution room carries forward.

Needs Approach

A method of sizing life insurance: income replacement plus debts, education costs, and final expenses, minus existing financial resources and coverage already in force.

Know Your Client (KYC)

A regulatory requirement to collect a client's financial situation, objectives, time horizon, and risk tolerance before making any suitability recommendation or trade.

Suitability

The standard requiring a recommendation to fit the client's documented objectives, risk tolerance, and circumstances. It is assessed at the time of the recommendation and reviewed periodically.

Beneficiary Designation

A named recipient on a registered plan or insurance policy. Assets with a valid designation generally pass directly to the beneficiary, bypassing the will and probate.

Trust

A legal arrangement separating legal title from beneficial enjoyment: a trustee holds assets for beneficiaries under the terms of a trust document, which may reduce probate and protect assets.

Unsystematic Risk

Company-specific risk, such as management failure or product recalls. It can be reduced by diversification and is generally not compensated with higher expected returns.

Rebalancing

Periodically returning portfolio weights to target allocations. It controls risk drift and imposes a discipline of selling winners and buying laggards.

Power of Attorney

A legal document authorizing a named person to act on another's financial affairs. A continuing or enduring version remains valid if the grantor becomes incapacitated.

Private Banking

Banking and wealth services for high-net-worth clients, typically combining discretionary portfolio management, lending, custody, and tax and estate planning support.

Compound Interest

Interest earned on both principal and previously accumulated interest: principal × (1 + rate ÷ periods)^(periods × years) − principal. Growth accelerates with more frequent compounding.

Effective Annual Rate

The true annual cost or yield accounting for compounding: (1 + APR ÷ n)^n − 1, where n is compounding periods per year. It exceeds the APR whenever n is greater than one.

Rule of 72

An approximation of the years required to double an investment: 72 divided by the annual percentage growth rate. It is most accurate at low to moderate rates.

Amortisation

The scheduled repayment of a loan through level payments. Early payments are mostly interest; later payments are mostly principal.

Deposit Insurance

Protection of eligible deposits up to a set limit per depositor per institution if the institution fails. It does not cover mutual funds, stocks, or most investment products.

Total Debt Service Ratio

A mortgage qualification measure comparing all housing and debt payments to gross income. It is broader than the gross debt service ratio, which counts housing costs only.

Line of Credit

A revolving borrowing facility with a limit; interest accrues only on the amount drawn, and minimum payments are often interest-only.

Annual Percentage Rate

The nominal annual interest rate disclosed on a loan or deposit, ignoring intra-year compounding. It understates the true cost relative to the effective annual rate.