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A

Above par - A term used to describe the price of a security when it is trading above its face value and would generally occur when the security’s income distributions are higher than those of other instruments currently available in the market.

Acquisition cost – the total cost of acquiring an asset and includes the price of the asset plus brokerage and commission fees.

Annuities - are contracts that insurance companies are obligated to back and allows your capital to grow and compound tax deferred. You as the annuity holder, defer taxes until you withdraw the money.

Appreciation – an increase in value of an asset.

Asset allocation – the way in which an investor proportions what percentage of their investments are placed into bonds, stocks and other assets.

After tax returns – the rate of return you receive after paying taxes. Taxes are normally levied on dividends and on capital gains that you realize upon selling the asset.

Amortization – in the context of a loan, amortization refers to process by which your loan principal decreases over the life of your loan. Each loan payment is split into two – a portion is applied to the principal while the other portion goes towards paying the interest on the loan.


B

Bear market - A prolonged period in which security prices (for example stock prices) fall and is usually accompanied by widespread pessimism and often occurs in a economic recession.

Below par value - A term used to describe the price of a security when it is trading below its face value.

Bid- ask quote –this is a pricing notation and entails two (2) price quotes:

Bid price – is the price at which the dealer is willing to buy and is always lower than the ask price

Bid- ask quote –this is a pricing notation and entails two (2) price quotes:

Bond –A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.

Book value - refers to the total amount a company would be worth if it liquidated its assets and paid back all its liabilities. Book value is calculated using the following formula and represents what the company is intrinsically worth.

Book value = total assets - intangible assets - liabilities

Book Value per share - A company's total assets minus total liabilities, or net assets, divided by its number of shares outstanding.

Bull market - A market in which prices are rising, characterized by high investor confidence.

Business cycle - More or less regular fluctuations in aggregate economic activity, between peaks and troughs, typically over a five to ten year period.


C

Call option - An option that gives the holder the right but not the obligation to purchase a stated quantity of the underlying instrument (for example shares, indices, commodities etc) at a specified price on or before a given date.

Callable bond - A bond that can be redeemed by the issuer prior to its maturity. The main reason a bond will be called is if interest rates fall below the rate of the bond that was first issued. If interest rates have declined since a company first issued the bonds, it will likely want to refinance this debt at a lower rate of interest. In this case, company will call its current bonds and reissue them at a lower rate of interest.

Bid- ask quote –this is a pricing notation and entails two (2) price quotes:

Capital gains – this is another term for profit and is calculated by subtracting the sale price from the purchase price.

Collateral - An asset pledged by a borrower as a guarantee to a lender until a loan or bond is repaid. If the borrower defaults, the lender has a right to sell the collateral asset.

Commercial paper – this is an unsecured, short-term debt instrument issued by a corporation and used to meet a company’s working capital needs such as financing accounts receivable, inventories and meeting short-term liabilities. Commercial paper normally has maturities not exceeding 270 days and are not usually backed by any form of collateral.

Capitalization – the total market value of a company’s outstanding stock and is calculated by multiplying its share price by the number of outstanding shares. The term capitalization is often shortened to “cap”.

Cash equivalents – investments that you can quickly convert to cash for example, savings accounts, Treasury bills

Cash flow - The amount of money which flows in and out of a business. If more money flows into a business than out of it, it is cash positive while if more money flows out than in, it is cash negative.

Capital Adequacy - A measure of the financial strength of a bank or securities firm, usually expressed as a ratio of its capital to its assets.

Credit rating - An assessment of the credit worthiness of a borrower. A credit rating can be assigned to any entity that seeks to borrow money – an individual, corporation, state or provincial authority, or sovereign government. Credit assessment and evaluation for companies and governments is generally done by a credit rating agency such as Standard & Poor’s or Moody’s. Credit rating agencies typically assign letter grades to indicate ratings. For example, Standard & Poor’s has a credit rating scale ranging from AAA (excellent) and AA+ to C and D. The lower the credit rating, there is the increased likelihood that the borrower will be challenged to repay its debt.

Credit Risk - The risk that an issuer might default on a payment or go into liquidation.

Credit downgrade - A negative change in the rating of an institution or security, for example, a company’s credit rating goes from being AAA to BB. A downgrade in an institution’s or security’s credit rating usually occurs when the future prospects for the institution / security have weakened from the original recommendation, usually due to a material and fundamental change in the company's operations, macro-economic conditions, future outlook or industry prospects.

Certificates of Deposit (CD) - A certificate of deposit is a promissory note issued by a bank whereby it promises to pay interest on the funds and to repay the capital amount borrowed. The holders of such instruments cannot freely withdraw from this account without incurring a penalty. Essentially, when you purchase a CD, you invest a fixed sum of money for fixed period of time in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. If you redeem your CD before it matures, you may have to pay an “early withdrawal” penalty or forfeit a portion of the interest you earned.

Convertible bonds - are bonds issued by companies that can be converted into ordinary shares or preference shares at a given price at a future date.

Compound interest - The process by which interest earned on an investment is added back to the amount invested, so increasing the amount of 'principal' on which further interest will be earned in future periods.

Compound interest is calculated as follows


D

Date of record - The date by which a shareholder must own shares in order to qualify for a dividend. On this date, the company looks to see who are their shareholders or "holders of record" in order to ensure that dividends are sent to the right investors.

Debt Consolidation- is a process of combining/consolidating all or several debt accounts into one for the purpose of either lowering the payment, interest rate, or both.

Day order - An order placed with a broker to purchase or sell stock, a commodity or financial instrument at specified price limits. If not executed that day the order becomes invalid and the broker will not process it.

Default- Failure by a debtor to meet the terms of a loan either by not paying interest due or not repaying the principal when due.

Death Benefit – The amount payable by a life insurance company to the beneficiaries on the death of the insured (the policyholder), typically a close relative.

Debt Refinancing -The raising of new money by a company in order to pay off existing debt.

Debt Restructuring – This refers to a method used by companies with outstanding debt obligations to alter the terms of the original debt agreements in order to avoid default on existing debt or to take advantage of a lower interest rate.

Declaration Date – The date on which a dividend is declared by a company's directors.

Deed - A document which legally transfers ownership of property from one party to another.

Default risk -is the possibility that the issuer of a bond might fail to repay its principal or interest as required under the terms of the agreement. Corporates tend to have higher default risks than governments.

Diversification –is along the old adage “don’t keep all your eggs in one basket” and addresses the need to distribute your capital among various assets to reduce potential loss.

Deposit Insurance -is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due with the aim of promoting financial stability.

In Trinidad & Tobago, deposit insurance is provided through the Deposit Insurance Corporation (DIC) that was established by the Central Bank and Financial Institutions (Non-Banking) (Amendment) Act, 1986. The DIC’s main function is to manage a Fund to provide insurance protection for depositors against the potential loss of their deposits should a member financial institution fail. In the Budget 2012, the insurance coverage was increased from TT$75,000 to $125,000 per depositor. Please note that such coverage is only applicable to those instruments that are covered under the Central Bank and Financial Institutions (Non-Banking) (Amendment) Act, 1986 (Act No. 2 of 1986) namely, savings accounts, chequeing accounts and time deposit accounts.


E

Earnings - The annual profits (revenues less cost of sales and operating expenses) of a company after deduction of tax, dividends to preference shareholders and bondholders.

Emergency reserve – An account set aside by an individual or business to meet any unexpected costs that may arise in the future

Estate planning – refers to tasks that serve to manage an individual's asset base in the event of their incapacitation or death and includes the creation of a will, bequeathing assets to heirs, establishing a durable Power of Attorney and naming of an executor of an estate.

Exchange traded funds (ETF’s) -A fund that tracks an index, but can be traded like a stock on stock exchanges. Similar to a stock, investors can short sell ETFs buy and sell them at any time during the day.

Economic cycle –The natural fluctuation of the economy between periods of expansion (growth) and contraction (recession).

Economic growth -An increase in the level of production of goods and services by a country over a certain period of time namely quarterly and annually.

Escrow – this is whereby a third party holds or secures a financial instrument on behalf of the two other parties. The financial security is held by the third party until appropriate written or oral instructions are received or until obligations have been fulfilled.

Executor -A person or institution appointed in a will to ensure that the wishes of the deceased are duly carried out.


F

Face value - also called Par Value - The value of a bond, note or other security as printed on the document. Throughout the life of a security, its market price will fluctuate but at maturity this face amount is payable.

Financial analysis – refers to the process of evaluating businesses and projects to determine whether they are stable, solvent, liquid, or profitable enough to be invested in. This information is gleaned from the income statement, balance sheet, and cash flow statement.

Fundamental analysis – refers to a method of evaluating a security that entails attempting to measure its intrinsic value and comparing this value to the security's current price, with the aim of determining whether to buy (underpriced) or sell (overpriced). The evaluation process involves examining related economic, financial and company and industry-specific factors.

Fixed Rate Mortgage (FRM) - is a mortgage with a fixed interest rate, term and payment.

Floating the rate - is a mortgage term for playing the market and not locking the interest rate in at application


G

Growth and income fund - A mutual fund or ETF that has a dual strategy of capital appreciation (growth) and current income generation through dividends or interest payments.

Gearing – refers to the assessment of a company’s debt related to its equity capital, usually expressed in percentage form to determine the extent to which its operations are funded by lenders versus shareholders.

Geographical diversification –in terms of investment, this refers to buying different assets located in different geographic regions so as to reduce the overall risk and improve returns on the portfolio. This term is also used to refer to a company’s strategy to locate their operations in different parts of the world in order to reduce business and operational risk.

Growth stocks – are stocks of companies whose earnings are expected to grow at an above-average rate relative to the market. Generally, a growth stock usually does not pay a dividend as the earnings would normally be reinvested in the company to fund capital projects.

Good till cancelled -An order to a broker to buy or sell shares at a specified price that remains valid until executed or cancelled by the client.

Goodwill – The value of a business to a purchaser over and above its net asset value and includes the worth of intangible assets such as reputation, brand name, good customer relations, high employee morale and other factors that improve the company's business.


H

Hair cut – a term used to describe the losses suffered by an investor in a debt restructuring.

High-yield Debt – this refers to debt that has a higher yield because of the perceived higher rate of default. This debt is also referred to as non-investment grade or junk bond.

Holding period –the length of time an investor holds an investment.

Hostile takeover – this refers to the situation whereby one company makes a bid to takeover another company, but the directors of the target company are not in agreement with the bid. Generally, mergers and acquisitions are amiable where both parties – the purchaser and the company to be bought are in agreement with the transaction. In a hostile takeover, this is not the case. The management of the company who is the subject of the takeover rejects the offer, but the bidder continues to pursue the acquisition.

A hostile takeover can be initially along three avenues:
  • Through a tender offer – the bidder proposes to purchase the target company's stock at a fixed price above the current market price.
  • Through the acquisition of the target’s company stocks on the open market.
  • Through a proxy fight – this is achieved by the potential acquirer persuading enough shareholders to replace the management of the company with members who agree with the acquisition.

Hyperinflation -an economic condition in which prices rise rapidly as a currency loses its value. In essence, inflation is out of control.


I

Inflation – The increase of prices in an economy over a period of time.

Initial Public Offering – The first offering of a company’s shares to the public.

Insurance – A contract that provides protection against an event that may or may not happen. This coverage is obtained by paying a premium and is designed to essentially protect the financial well-being of an individual, company or other entity in the case of unexpected loss.

Intangible assets – Assets which are nonphysical in form, that is, which cannot be seen such as patents, goodwill, trademarks and copyrights.

Interest rates – As a borrower, interest rate is referred to as the extra charge you pay when you borrow money. As a lender or investor, interest rate is referred to as the income you receive if you lend it or invest it in an income-producing bank account or in a security.

Investment-grade bonds – Bonds that have a low degree of default as the issuer is deemed to be financially sound and secure and unlikely to renege on its promise to repay.

Illiquid – This refers to the situation whereby a security or asset cannot be easily sold or exchanged without a substantial loss in value.

Impaired asset – An asset is impaired when its market value / price is below the value listed on the company's balance sheet.

Inheritance – All or part of a person's estate/assets that is given to an heir once the person is deceased

Insolvency - The inability of a person or company to settle debts when they become payable or the point at which a company’s liabilities exceed its assets.

Intestate - is the condition of the estate of a person who dies without having made a valid will or other binding declaration

Insider information – This refers to price-sensitive information (information that has the ability to move the asset’s price) about a company that has not yet been made public. Such information should not be used to make an investment decision.

Insider Dealing / Trading – Persons who have insider information and use that information it to make a profit for themselves or for someone else. This action is illegal and is usually considered a criminal offence.

Interbank rate - The interbank rate or London Inter-Bank Offer Rate (LIBOR) is the rate that the banks charge each other for loans. Such loans are very large and are borrowed for periods between one day and several years and aids banks in meeting their liquidity needs and helps them to avoid holding excessively large amounts of their asset base as liquid assets.


J

Junk bonds – Bonds which offer high rates of interest but with correspondingly higher risk attached to the capital.

Joint owned property – Equal ownership of property by two or more people. In the event of the death of one of the owners, title passes to the survivor (or survivors in equal amounts)

Joint account – Typically a bank or brokerage account in the names of two (or more) people. Arrangements can be made such that either individual or all signatures are required when drawing cheques.


L

Large capitalization stocks- Refers to the stocks issued by the largest companies with the highest market capitalisations.

Leading indicators - Economic indicators which tend to predict changes in the economy, such as sentiment surveys, housing starts or investment orders.

Lagging indicators - Measurable economic factors that change after the economy has already begun to follow a particular pattern or trend.

Letters of administration – This is an order made by the court that empowers the Administrator to settle the affairs of a deceased person in accordance with his/her will. This action arises when an executor has not been named or appointed or has failed to act for some other reason. This order also comes into play when a person has died intestate that is, a deceased person who has failed to make a will.

Lagging economic indicator – A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend.

Lock up period - A lockup period refers to a stipulated time period in which specified holders including insiders and holders of majority stakes of the company’s shares are not allowed sell any of their shares.


M

Management fees - These are charges levied by investment managers for managing an investment fund or portfolio. This fee is compensation for the investment manager’s expertise and time.

Majority shareholder – A shareholder who owns and controls more than 50% of a corporation’s outstanding shares.

Market cap – This is an abbreviation for market capitalization and refers to the worth of a company’s outstanding stock. It is computed by multiplying the total number of outstanding shares by the current price of the stock.

Minority interest – This is when a shareholder owns less than 50% ownership of a corporation's voting stock and as such, don’t have enough ownership to control company operations.

Money Market Fund – Is an investment vehicle that invests primarily in short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments.

Monetary Policy – Actions taken by monetary authorities such as Central banks to influence the money supply and interest rates.

Mutual Fund - An investment vehicle that combines the funds of various investors and invest in various securities stocks, bonds, money market instruments and similar assets. Mutual funds are generally operated by money managers and are normally structured to meet certain investment objectives as stated in its prospectus.

Market Risk- Is the loss that arises from movements in market prices.


N

No Load Fund - A mutual fund that charges neither a commission nor a sales charge.

Net asset value – This refers to the per share value for mutual funds or exchange traded funds (ETFs). It is computed by subtracting the funds’ liabilities from its assets and dividing this value by the number of fund shares outstanding.

NAV return- The change in the net asset value of an exchange-traded fund or mutual fund

Nominal rate of return – Refers to the rate of return before taking into consideration any taxes, investment fees and inflation. When taxes, investment fees and inflation are accounted for, this rate of return is normally lower than the nominal rate of return.


O

Outperform - When a security posts a higher return than the market. For example, if a stock appreciates by 15% for the year and the stock market posts a return of 10%, the stock is said to outperform the market by 5% (15% - 10%).

On the run Treasuries – This refers to the most recently issued U.S. Treasury bond or note of a particular maturity.

Off the run Treasuries – Refers to Treasury securities that were issued before the most recent issue and are still outstanding.

Open ended funds – Mutual funds that have no restrictions as it pertains to the amount of shares that the fund will issue.

Oversubscribed - A situation in which the demand for a particular security exceeds supply.


P

Par Value – This is also called face value or maturity value and is the value that the issue promises to repay at the maturity date.

Preferred Stock – A stock that represents ownership in a company in terms of its assets and earnings. As the name suggests, preferred stock has distinct advantages – preferred shareholders are given priority regarding dividend payments and bankruptcy. The dividend is normally fixed. One drawback is the absence of any voting rights.

Price-to-Earnings Ratio (P/E Ratio) – A ratio that expresses a stock’s price to its earnings per share. It is also a popular measure used to assess the value of a stock.

Passive investing – An investment strategy that entails purchasing a security with the intention of holding it over a long period of time, with limited trading involved.

Prepayment – This refers to the repayment of all or part of a debt prior to its due date.

Premium – The amount by which a security trades above its face or par value.


Q

Quantitative easing – This refers to policy action by central banks that involves purchasing securities from the market. The institutions selling those bonds (either commercial banks or other financial businesses such as insurance companies) will then have "new" money in their accounts, which then boosts the money supply. With interest rates already low, central banks are limited in cutting interest rates further. Thus in an effort to stimulate lending activity, the only option is to pump money into the financial system via purchasing government securities.

Qualified Opinion – This is a cautionary statement written by an auditor indicating that the information provided was limited in scope and/or the company being audited has not maintained GAAP accounting principles.

Quick Ratio – A metric that evaluates a company’s liquidity as it pertains to its ability to meet its short term debts and is computed using the following formula:

Quick ratio = (current assets – inventories) / current liabilities


R

Rate of return - The gain or loss on an investment over a specified period, expressed as a percentage of the total amount invested.

Ratio analysis - Is a management tool that utilizes mathematical ratios to gain an understanding of a company’s financial results and standing in several key areas including profitability and operational efficiency. Ratios utilize the data contained in a company’s financial statements. Ratios allow companies of different sizes and in different industries to be easily compared. Financial ratios are often divided up into seven main categories:

  • Liquidity
  • Solvency
  • Efficiency
  • Profitability
  • Market prospect
  • Investment leverage
  • Coverage

Rational Behaviour – Is the premise that, when people are given a choice, they would choose the option that will give them the most satisfaction and / benefit.

Real economic growth rate – Is a metric that measures a country’s rate of growth from one period to another, adjusted for the effects of inflation or deflation. Rising and falling consumer prices distorts the value of money and in turn, misrepresents a country’s economic performance. In order to get an accurate picture, the economic growth is adjusted in order to reflect a “constant dollar”.

Realized Gain - A gain that arises when an asset is sold at a price that is higher than the original purchase price (acquisition cost).

Realized loss - A loss that arises when an asset is sold at a price that is below the original purchase price (acquisition cost).

Rebalancing – This is the process of realigning an asset’s weight in a portfolio. The realignment is necessary when the asset’s weight deviates from the original percentage due to fluctuations in its price. In the case when the price of the asset rises, its weight within a portfolio will subsequently rise. In order to bring the asset’s weight to the original intended weight, some units of the asset will have to be sold. The opposite will occur if the asset’s weight goes below the original intended target, more of the asset will have to be purchased.

Recession – A decline in economic activity for two or more consecutive quarters and is usually accompanied by an increase in unemployment and a decrease in manufacturing activity, industrial production and consumption among consumers.

Reinvestment Risk – This risk arises when interest or coupon income earned from a bond cannot be reinvested at the prevailing interest rate when the bond was initially purchased. Bond investors are more exposed to this risk when interest rates are declining.


S

Settlement date – The date whereby a security transaction must be completed. In the event a security is purchased, the monies must be paid by the settlement date and similarly, when assets are sold, the asset must be delivered to the buyer. The settlement date is usually three (3) business days after the transaction is executed and is written as (T+3).

Share repurchase – A program by which a company buys back its own shares, effectively reducing the number of shares outstanding (or its supply of shares). The company can buy shares directly from the market or offer its shareholder the option to tender their shares directly to the company at a fixed price.

Shareholders’ Equity – Represents the amount by which a company is financed by common and preferred shares and is calculated by subtracting total liabilities from total assets.

Stop Order – A market order that specifies to buy or sell a certain quantity of a security if a particular price is reached or goes beyond the specified price.

Solvency – The ability of a company to meet its financial obligations.

Small capitalization stocks - Stocks with a relatively small market capitalization. The definition of small cap tend to vary among brokerages.

Stock split – This refers to a corporate action whereby a company divides its existing shares into multiple shares, usually by a specific multiple. The resulting increase in the number of shares does not affect the proportionate equity of each shareholder. The most common reasons for a stock split include the need to distribute additional shares to existing shareholders or to lower the share price if the stock is perceived to be too expensive,

Strategic asset allocation – Involves creating a portfolio with specified weights for particular assets in order to achieve the investment parameters (i.e risk and return objectives) set out by an investor. As asset prices fluctuate, rebalancing is required periodically in order to reestablish the asset’s target weight.


T

Tax Break – Anything that reduces the amount of taxes an individual or business has to pay.

Tax deferred account – This refers to an account whereby the contributions within the account are not taxed – the taxes are postponed until a later date.

Tax exempt – Not subjected to taxation.

Tax allowance – The part of income that is earned and the individual or company does not pay taxes on.

Tactical Asset Allocation – Involves rebalancing the weights of asset classes in a portfolio in an attempt to benefit from current market trends. This investment strategy is short term in nature and is primarily driven to make a quick profit. Once the profits have been realized, the fund manager will seek to rebalance to the strategic asset allocation.

Time horizon – The period of time a sum of money is expected to be invested.

Term life insurance – Insurance that only covers a specified period of time.

Time value of money – Is the concept that a dollar is worth more today than in the future as it can be invested now and interest can be earned.

Term to maturity – The time between when a debt security is issued and when it matures or is repaid.

Technical analysis – A method of evaluating securities by utilizing market data such as past prices, volumes and charts. Technical analysts attempt to identify patterns with the objective of predicting a security’s future price.

Total Return – Refers to the return from an investment and includes income derived from interest earned on bonds and dividend payment from shares and capital gains due to changes in the market price of a security.

Top Down approach – An investment strategy that focuses on the big picture and begins with analyzing the economy, with the objective of identifying the best performing sectors and industries to invest in. Once the sectors are identified, the best companies in those sectors are selected.


U

Underemployment – Refers to the situation where people work less hours than they desire and in a job that does not fully utilize their skills and knowledge.

Undersubscribed – Refers to the circumstance when a company issues stocks, bonds or other publicly traded securities and the offering does not have enough buyers.

Undervalued –When the current price of a security is below its perceived or intrinsic value.

Unrealized gain – A gain that results from holding a security when the current price is higher than the original purchase price. The asset is not sold, thus the gain is not realized.

Unrealized loss – A loss that results from holding a security when the current price is lower than the original purchase price. The asset is not sold, thus the loss is not realized.

Unlisted security – A security that does not trade on the stock exchange. Trading is done through the Over the counter market. Such securities more often than are unable to meet the stock market listing requirements including the market capitalization and income threshold. Consequently, unlisted securities tend to be less liquid and pose a greater risk to investors.


V

Valuation - The process of determining the value of an asset or company by using absolute, relative or option pricing models.

Value stock – A stock that is trading at a lower price relative to the company’s financial performance and performance indicators of the stock itself. This concept is premised on market inefficiency – markets are not always efficient, thus securities’ prices sometimes do not reflect performance. Value stocks are normally characterized by having high dividend yields, low price to book ratios and price to earnings ratio.

Value chain – This is a concept that focuses on all the activities and steps that a business goes through - from obtaining its inputs to the final delivery of the good and service to the customer. The objective is to eliminate wasteful and loss making steps and activities and build and improve on those activities that create and build value in order to deliver maximum value for a minimum cost.

Venture Capital – Monies provided to startup companies and small businesses with perceived growth potential. Such companies are usually pioneers in their fields with an unproven and untested market, as such the risks are high. Consequently, such companies do not have access to capital markets, making venture capital a critical source of funding. Venture capital also refers to managerial and technical expertise.

Venture Capitalist- A person who provides start-up funds to startup companies.


W

Watch list – essentially has two meanings:

Ratio analysis - Is a management tool that utilizes mathematical ratios to gain an understanding of a company’s financial results and standing in several key areas including profitability and operational efficiency. Ratios utilize the data contained in a company’s financial statements. Ratios allow companies of different sizes and in different industries to be easily compared. Financial ratios are often divided up into seven main categories:

  • A list of securities that are closely monitored by a brokerage firm or stock exchange in order to identify any irregularities.
  • A list of securities that are closely monitored for investment opportunities.

Waiver of premium – In the event that a person becomes disabled or seriously ill and is unable to work, this clause or option facilitates the nonpayment of premiums by the insurance policy holder.

Wage push inflation – A general rise in consumer prices caused by higher wage cost. In an effort to cover the higher wages, businesses will increase the cost of their goods and services – causing an inflationary spiral.

Wealth tax – A tax imposed on an individuals’ wealth and is based on the market value of assets owned.

Will - Is a legal document that outlines the rights that others will have over a person’s assets upon their death.


Y

Watch list – essentially has two meanings:

Yield Curve – A graphical representation of the various yields of similar quality bonds that are currently being offered on bonds of different maturities. The yield curve can take three primary shapes:

Upward sloping (Positive or normal yield curve) - occurs when short-term yields are lower than long-term yields (the line is sloping upwards).


Downward sloping (Inverted Yield curve) – when short-term yields are higher than long-term yields.



Downward sloping (Inverted Yield curve) – when short-term yields are higher than long-term yields.



Yield - The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value

Yield to Maturity – The rate of return an investor will receive if the bond is held to the end of its life.


Z

Zero coupon bond - A bond which does not pay any coupon payment. It is sold at a deep discount (below its face value) and is redeemed at its face value upon maturity. In the absence of any coupon payments, zero coupon bonds are not subjected to reinvestment risk.

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