Glossary

Accrued Interest

• Interest accumulated on a bond or debenture since the last interest payment date

Bankers’ Acceptances

• Short-term negotiable instruments issued by a non- financial corporation but guaranteed as to principal and interest by its bank.

Bond

• An investment security representing indebtedness where the issuer promises to pay the holder a specified amount of interest for a specified length of time, and to repay the loan at its maturity date.

Callable

• May be redeemed upon due notice by the issuer.

Canadian Investor Protection Fund

• A fund established by the stock exchanges and the Investment Dealers Association to protect investors from losses resulting from the bankruptcy of a Member firm.

Commercial Paper

• Short-term negotiable debt securities issued by corporations with terms of a few days to a year.

Compound Interest

• Interest earned on an investment at periodic intervals and added to the amount of the investment. In simple terms, interest paid on interest.

Convertible

• A bond or debenture which may be exchanged by the owner, usually for the common stock of the same company, in accordance with the terms of the conversion privilege.

Coupon

• That portion of a bond entitling the holder to an interest payment of a specified amount on a specified date.

Current Yield

• The Current Yield is the coupon rate of interest divided by the purchase price.

Debenture

• An investment security representing the indebtedness of a company, backed only by the general credit of the issuer and unsecured by mortgage or lien on any specific asset.

Discount

• The price at which a bond sells below its par value.

Extendible Bond or Debenture

• A bond or debenture with terms granting the holder the option to extend the maturity date by a specified number of years.

Face Value

• The value of a bond or debenture that appears on the face of the certificate. Face value is ordinarily the amount the issuer will pay at maturity.

Fixed Income Securities

• Debt securities which generate a predictable amount of interest with terms more than one year.

Interest

• Money paid to the lender by a borrower at predetermined dates.

Market Price

• The current price at which a security is trading.

Maturity

• The date at which a bond or debenture becomes due.

Money Market

• That sector of the capital market where short-term financial obligations are bought and sold. These include Treasury Bills, Commercial Paper, and Bankers’ Acceptances.

Par Value

• The stated face value of a bond.

Premium

• The price at which a debt security may sell above its par value.

Retractable

• A feature which can be included in a new debt issue, granting the holder the option under specified conditions to encash the security on a stated date/dates – prior to maturity.

Strip Bonds or Zero Coupon Residuals

• Usually high quality federal or provincial government bonds originally issued in bearer form, where some or all of the interest coupons have been detached. The bond principal (the residual) and any remaining coupons then trade separately.

Treasury Bills

• Short-term government debt issued in denominations ranging from $5,000 to $1,000,000. Treasury Bills are not interest bearing, but are sold at a discount to mature at par value. The difference between the purchase price and par at maturity represents the yield to maturity.