I left a message for Joan and Jay asking them for some clarity on some of the terms that they provided in their last posting. What I do know is that while some understand these terms, many do not. That is the exact point of this blog on financial empowerment. The more questions you ask, the better clarity you have the better you can make a decision.

I just was sent this article from the Business Section of the Toronto Star and the title is, Women’s power equals economic power. Women represent 50% of the marketplace and with some education we will have economic power to bring about changes we want. Get educated and ask many questions!

If I was shopping for a suit and I wanted a specific fabric, designer, and cut I will ask the sales person to help me. I laugh because every time I go into Home Depot to ask for something that I need to buy I never have the right terminology instead I use my hands a lot to explain. Well, that is not always the most effective way! I finally end up with what I need however it takes a few tries.

Here is the breakdown for you from Joan and Jay and if you have any more questions please do not hesitate to call:

Happy Spring!

This entry will focus on some key definitions many of our clients have been asking.
Money Market Fund = The investment objective of the Fund is to provide investors with interest income by investing in high interest cash accounts.

Returns (or Rate of Return) = The percentage by which an investment appreciates or depreciates over a given period of time.

Government bonds = “Government of Canada Real Return Bonds (the “Bonds”) constitute direct, unsecured, unconditional obligations of Her Majesty in right of Canada. The Bonds may be issued from time to time in different series, with the coupon rate and maturity date (“Maturity”) varying for each series. The Bonds of a series may not be called for redemption by the Government of Canada prior to Maturity for that series.
Each Bond has a nominal principal amount of $1,000 (“Principal”).
The Bonds bear interest adjusted in relation to the Consumer Price Index for Canada (the “CPI”).
Interest on the Bonds consists of both an inflation compensation component (“Inflation Compensation”) calculated based on Principal and payable at Maturity and a cash entitlement (“Coupon Interest”) calculated based on Principal and accrued Inflation Compensation, which Coupon Interest is payable in semi-annual instalments on the dates specified for each series of Bonds (the “Coupon Payment Dates”) in each year. Coupon Interest is calculated by multiplying one-half of the specified annual coupon rate for the relevant series of Bonds by the sum of the Principal and the Inflation Compensation accrued from the date the first Bond of such series was issued (the “Original Issue Date”) to the relevant Coupon Payment Date. At Maturity, in addition to Coupon Interest payable on such date, a final payment (the “Final Payment”) equal to the sum of Inflation Compensation accrued from the Original Issue Date to Maturity (whether positive or negative) and Principal will be made.”

Guaranteed Deposits = “The Canada Deposit Insurance Corporation (CDIC) is a federal Crown corporation created by Parliament in 1967 to protect your deposits made with member financial institutions in case of their failure. CDIC guarantees deposits with registered institutions in the event of the institution’s insolvency. This deposit insurance offers a maximum guarantee of $100,000 per person, per registered institution.”

Liquidity = The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can by easily bought or sold, are known as liquid assets.
It is the ability to convert an asset to cash quickly.

Bond yields = Yield is defined as the annual cash distributions divided by the current share price, in this case from bonds.
To calculate current yield for bonds, divide the coupon rate by the number shown as current price and multiply by 100. Example: 8.60% coupon divided by 85 current price = 0.1010, multiplied by 100 = 10.10% current yield on the bond.

Debt instrument = A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Types of debt instruments include notes, bonds, certificates, mortgages, leases or other agreements between a lender and a borrower.
Debt instruments are a way for markets and participants to easily transfer the ownership of debt obligations from one party to another. Debt obligation transferability increases liquidity and gives creditors a means of trading debt obligations on the market. Without debt instruments acting as a means to facilitate trading, debt is an obligation from one party to another. When a debt instrument is used as a medium to facilitate debt trading, debt obligations can be moved from one party to another quickly and efficiently.
If you would like us to publish more definitions, please write our editor for the specific terms you would like us to discuss.

Happy investing,
Jay F. Llave and Joan Morrow


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