Exam Identity and Quick-Use Plan
This Quick Reference is independent review support for candidates preparing for Canadian Securities Institute CSI Canadian Securities Course (CSC) CSC Exam 1.
Use it as a compact final-review map:
- Memorize core relationships: bond price/yield, yield curve signals, equity ratios, option payoffs.
- Drill decision points: monetary vs fiscal policy, primary vs secondary markets, common vs preferred shares, call vs put, clean vs dirty bond price.
- Practise calculations: accrued interest, current yield, EPS, P/E, dividend yield, working capital, debt ratios.
- Watch wording traps: investor protection does not mean protection from market loss; higher coupon does not always mean higher yield; “yield” can mean several different things.
High-Yield Topic Map
| Area | Must Know | Common Exam Trap |
|---|
| Canadian marketplace | Capital markets, money markets, primary vs secondary markets, dealer roles, exchanges, OTC | Confusing issuer proceeds in the primary market with investor-to-investor trading in the secondary market |
| Regulation and investor protection | Provincial/territorial regulation, CSA coordination, CIRO, CIPF, CDIC | CIPF/CDIC protect against insolvency-type risks, not normal market losses |
| Economy | GDP, inflation, unemployment, business cycle, monetary/fiscal policy, yield curve | Assuming all rising rates are bad for every investor; effects depend on asset class and time horizon |
| Fixed income | Coupon, maturity, yield, price, duration concept, credit quality, secured vs unsecured debt | Bond prices and yields move inversely |
| Equity | Common vs preferred shares, dividends, voting, residual claim, rights, warrants | Preferred shares are equity, not debt, even when they have fixed dividends |
| Derivatives | Calls, puts, forwards, futures, options, hedging vs speculation | Option buyer has rights; option writer has obligations |
| Financial statements | Balance sheet, income statement, cash flow, ratios | Net income is not the same as cash flow |
| Securities analysis | Fundamental, technical, top-down, bottom-up, risk-return trade-off | High return potential normally comes with higher risk, not lower risk |
Canadian Securities Market Structure
Key Organizations and Roles
| Organization / Term | Core Role | Exam-Relevant Distinction |
|---|
| Canadian Securities Administrators (CSA) | Umbrella group of provincial and territorial securities regulators | Coordinates regulation; Canada does not have a single national securities regulator in the same way some countries do |
| Provincial/territorial securities commissions | Administer securities laws in their jurisdictions | Registration, prospectus review, enforcement, disclosure requirements |
| Canadian Investment Regulatory Organization (CIRO) | Self-regulatory organization for investment dealers and mutual fund dealers | Oversees dealer conduct and market integrity rules within its mandate |
| Canadian Investor Protection Fund (CIPF) | Protects eligible client property if a member firm becomes insolvent | Does not protect against investment losses from market decline |
| Canada Deposit Insurance Corporation (CDIC) | Protects eligible deposits at member institutions | Does not cover stocks, bonds, mutual funds, or normal investment losses |
| Bank of Canada | Central bank; monetary policy, financial system stability, currency issuance | Influences short-term interest rates; not a securities dealer regulator |
| OSFI | Prudential regulator for federally regulated financial institutions | Focuses on safety and soundness of banks, insurers, pension plans under federal mandate |
| Exchanges | Central marketplaces for listed securities | Provide listing standards, transparency, and auction/continuous trading mechanisms |
| OTC market | Dealer network for securities not traded on an exchange or for many debt instruments | Less centralized than exchange trading |
Market Types
| Market | Meaning | Examples | Exam Angle |
|---|
| Money market | Short-term debt market | T-bills, commercial paper, bankers’ acceptances | Liquidity and safety are usually emphasized over high return |
| Capital market | Long-term financing market | Bonds, debentures, preferred shares, common shares | Used for long-term capital raising and investment |
| Primary market | New securities are issued | IPO, treasury offering, new bond issue | Issuer receives proceeds, less issue costs |
| Secondary market | Existing securities trade among investors | Exchange trading, OTC bond trading | Issuer usually does not receive proceeds |
| Auction market | Buyers and sellers meet through a central system | Listed equities | Transparent bid/ask and price discovery |
| Dealer market | Dealers quote bid and ask prices | Many bonds, money market instruments | Dealer earns spread and may trade as principal |
Primary Market and New Issues
| Term | Meaning | Candidate Cue |
|---|
| Issuer | Entity raising capital by selling securities | Corporation, government, municipality, financial institution |
| Treasury offering | New securities issued by the company | Proceeds go to the issuer |
| Secondary offering | Existing shareholder sells previously issued securities | Proceeds go to selling shareholder, not issuer |
| IPO | First public offering of shares | Converts private ownership to public market access |
| Prospectus | Disclosure document for public distribution | Provides material facts; not a guarantee of success |
| Preliminary prospectus | Initial prospectus filed for review | Often associated with the waiting period |
| Final prospectus | Cleared version used for sale | Contains final offering details |
| Underwriting | Dealer or syndicate helps distribute securities | Can involve bought deal or best efforts |
| Bought deal | Dealer buys issue from issuer and resells | Issuer has financing certainty; dealer takes inventory risk |
| Best efforts | Dealer attempts to sell, without full purchase commitment | Issuer bears more distribution risk |
| Private placement | Exempt distribution to qualifying investors | Less public disclosure than prospectus offering |
| Rights offering | Existing shareholders receive rights to buy additional shares | Helps reduce dilution concerns for existing holders |
Economy and Policy Reference
Core Macroeconomic Relationships
\[
GDP = C + I + G + (X - M)
\]
Where \(C\) = consumption, \(I\) = investment, \(G\) = government spending, \(X\) = exports, and \(M\) = imports.
\[
\text{Approximate real return} \approx \text{nominal return} - \text{inflation rate}
\]\[
\text{Real return} = \frac{1 + \text{nominal return}}{1 + \text{inflation rate}} - 1
\]
Economic Indicators
| Indicator | What It Measures | Typical Market Interpretation |
|---|
| GDP growth | Total economic output | Strong growth can support earnings but may raise inflation/rate concerns |
| Inflation | General price level increases | Erodes purchasing power; may lead to tighter monetary policy |
| Unemployment | Labour market slack | High unemployment may signal weak demand; very low unemployment may signal wage pressure |
| Consumer confidence | Household willingness to spend | Higher confidence can support consumption-sensitive sectors |
| Business investment | Corporate confidence and capacity expansion | Often cyclical; supports productivity and future growth |
| Housing activity | Construction, resale, mortgage demand | Sensitive to interest rates |
| Exchange rate | Value of Canadian dollar vs other currencies | Strong CAD may pressure exporters; weak CAD may raise import costs |
Business Cycle
| Phase | Economic Conditions | Common Asset/Policy Effects |
|---|
| Expansion | Rising output, employment, income | Equities may benefit; inflation pressure can build |
| Peak | Growth slows after strong expansion | Central bank may be restrictive if inflation is high |
| Contraction / recession | Falling or weak output, higher unemployment | Defensive sectors and high-quality bonds may be favoured |
| Trough | Economy stabilizes before recovery | Interest rates may already be lower; cyclicals may recover early |
Monetary vs Fiscal Policy
| Policy Type | Controlled By | Tools | Main Transmission |
|---|
| Monetary policy | Bank of Canada | Policy interest rate, liquidity operations, guidance | Affects borrowing costs, credit, inflation expectations, exchange rates |
| Fiscal policy | Federal/provincial governments | Spending, taxation, transfers, deficits/surpluses | Affects aggregate demand and public borrowing |
Interest Rate and Yield Curve Signals
| Yield Curve Shape | Description | Typical Interpretation |
|---|
| Normal / upward sloping | Long rates above short rates | Markets expect growth/inflation premium or normal term premium |
| Flat | Short and long rates similar | Uncertainty or transition point in cycle |
| Inverted | Short rates above long rates | Often associated with restrictive policy and recession risk |
| Steepening | Long rates rise vs short rates or short rates fall faster | Growth/inflation expectations may be increasing, or policy easing may be expected |
| Flattening | Long rates fall vs short rates or short rates rise faster | Slowing growth expectations or policy tightening |
Fixed Income Quick Reference
Bond Building Blocks
| Feature | Meaning | Exam Cue |
|---|
| Par / face value | Amount repaid at maturity | Often quoted as 100 or 1,000 conceptually |
| Coupon rate | Annual interest as percentage of par | Coupon is based on par, not market price |
| Coupon payment | Periodic interest payment | Semi-annual is common for many bonds |
| Maturity | Date principal is repaid | Longer maturities usually have greater interest rate sensitivity |
| Market price | Current trading price | Moves inversely with yield |
| Current yield | Annual coupon divided by market price | Ignores capital gain/loss to maturity |
| Yield to maturity | Total return if held to maturity, assuming payments and reinvestment assumptions | Better measure than current yield, but still assumption-based |
| Yield to call | Yield if bond is called early | Important for callable bonds bought at a premium |
| Clean price | Quoted bond price excluding accrued interest | Common quote convention |
| Dirty / full price | Clean price plus accrued interest | Actual amount buyer pays |
| Accrued interest | Interest earned since last coupon date | Buyer pays seller accrued interest at settlement |
Bond Price and Yield Rules
| If This Happens | Bond Price Effect | Why |
|---|
| Market yields rise | Existing bond prices fall | Old coupons are less attractive |
| Market yields fall | Existing bond prices rise | Old coupons are more attractive |
| Coupon rate > market yield | Bond trades at premium | Coupon is above market requirement |
| Coupon rate < market yield | Bond trades at discount | Coupon is below market requirement |
| Coupon rate = market yield | Bond trades near par | Coupon matches required yield |
| Longer maturity | Greater price sensitivity | Cash flows are received farther in the future |
| Lower coupon | Greater price sensitivity | More value comes from distant principal repayment |
| Higher credit risk | Higher required yield | Investors demand risk premium |
\[
\text{Current yield} = \frac{\text{annual coupon interest}}{\text{market price}}
\]\[
\text{Accrued interest} =
\text{coupon payment} \times
\frac{\text{days since last coupon}}{\text{days in coupon period}}
\]\[
\text{Full price} = \text{quoted clean price} + \text{accrued interest}
\]
Approximate yield to maturity:
\[
\text{Approx. YTM} =
\frac{\text{annual coupon} + \frac{\text{par value} - \text{price}}{\text{years to maturity}}}
{\frac{\text{par value} + \text{price}}{2}}
\]
Approximate bond price change using duration concept:
\[
\%\Delta P \approx -D \times \Delta y
\]
Where \(D\) is duration and \(\Delta y\) is the change in yield. The negative sign reflects the inverse price/yield relationship.
Fixed Income Instruments
| Instrument | Issuer / Backing | Key Characteristics | Exam Distinction |
|---|
| Treasury bill | Federal government short-term debt | Sold at discount, matures at face value | No coupon; return comes from discount |
| Government of Canada bond | Federal government | High credit quality, benchmark yields | Lower credit risk than most corporate debt |
| Provincial bond | Province | Usually higher yield than federal bonds | Credit risk varies by province |
| Municipal bond | Municipality | Used for local infrastructure and services | Credit quality depends on municipality |
| Corporate bond | Corporation | Coupon-paying debt | Higher credit risk than comparable government debt |
| Debenture | Unsecured corporate debt | Backed by general credit of issuer | No specific collateral |
| Mortgage bond | Secured by mortgage assets | Debt secured by real property loans | Collateral matters |
| Collateral trust bond | Secured by financial assets | Backed by pledged securities | Security is financial collateral |
| Equipment trust certificate | Secured by equipment | Often linked to transportation equipment | Collateral has resale value |
| Strip bond | Coupon and principal separated | Bought at discount, no periodic coupon | Interest accrues economically; tax treatment can be tested conceptually |
| Convertible bond | Bond convertible into common shares | Hybrid debt/equity feature | Conversion option benefits holder |
| Callable bond | Issuer can redeem before maturity | Reinvestment risk for investor | Likely called when rates fall |
| Put bond | Holder can demand early repayment | Benefits investor | Valuable when rates rise or credit weakens |
| Floating-rate note | Coupon resets with benchmark | Lower interest rate sensitivity | Income varies with rates |
Bond Quality and Risk
| Risk | Meaning | Most Relevant To |
|---|
| Interest rate risk | Price falls when rates rise | Long-term fixed-rate bonds |
| Reinvestment risk | Future coupon income reinvested at lower rates | Callable bonds and high-coupon bonds |
| Credit / default risk | Issuer may fail to pay | Corporate and lower-quality issuers |
| Liquidity risk | Hard to sell quickly at fair price | Thinly traded issues |
| Inflation risk | Fixed payments lose purchasing power | Long-term fixed-income investors |
| Call risk | Bond redeemed before maturity | Callable premium bonds |
| Currency risk | Foreign-currency payments fluctuate in CAD terms | Foreign bonds or global portfolios |
Equity Securities
Common vs Preferred Shares
| Feature | Common Shares | Preferred Shares |
|---|
| Legal nature | Equity ownership | Equity ownership with preference features |
| Voting rights | Usually voting | Usually limited or no voting unless special conditions occur |
| Dividend | Variable, not guaranteed | Usually fixed or formula-based, not guaranteed |
| Claim on assets | Residual claim after creditors and preferred shareholders | Ahead of common, behind debt |
| Upside potential | High, tied to company growth | Usually more limited |
| Risk | Higher | Usually lower than common but higher than debt |
| Income stability | Lower | Higher, if dividends are maintained |
| Main investor appeal | Growth and voting control | Income and priority over common dividends |
Preferred Share Types
| Type | Key Feature | Exam Cue |
|---|
| Cumulative preferred | Missed dividends accumulate | Arrears must normally be paid before common dividends |
| Non-cumulative preferred | Missed dividends do not accumulate | More risk for preferred shareholder |
| Participating preferred | May share in additional earnings | Potential upside beyond fixed dividend |
| Convertible preferred | Can convert into common shares | Hybrid income/growth feature |
| Callable / redeemable preferred | Issuer can redeem | Investor faces call/reinvestment risk |
| Retractable preferred | Holder can require issuer redemption | Holder has added protection |
| Floating-rate preferred | Dividend adjusts with rate benchmark | Less sensitive to rate changes than fixed-rate preferred |
| Rate-reset preferred | Dividend resets at scheduled intervals | Sensitive to reset spread and rate outlook |
\[
\text{EPS} = \frac{\text{net income} - \text{preferred dividends}}{\text{weighted average common shares outstanding}}
\]\[
\text{P/E ratio} = \frac{\text{market price per share}}{\text{earnings per share}}
\]\[
\text{Dividend yield} = \frac{\text{annual dividend per share}}{\text{market price per share}}
\]\[
\text{Dividend payout ratio} = \frac{\text{dividends}}{\text{net income}}
\]\[
\text{Book value per common share} =
\frac{\text{common shareholders' equity}}{\text{common shares outstanding}}
\]
Rights and Warrants
| Feature | Rights | Warrants |
|---|
| Issued to | Existing shareholders | Often attached to new securities or issued separately |
| Purpose | Let shareholders buy more shares, often to maintain proportionate ownership | Sweetener or long-term option to buy shares |
| Life | Short-term | Longer-term |
| Exercise price | Often below current market at issue | Often above current market at issue |
| Dilution effect | New shares issued if exercised | New shares issued if exercised |
| Exam trap | Rights are not the same as dividends | Warrants are not the same as listed call options, though payoff logic is similar |
Equity Trading and Orders
| Term / Order | Meaning | Best Used When | Trap |
|---|
| Bid | Highest price buyer is willing to pay | Selling reference | Investor sells at bid, not ask |
| Ask / offer | Lowest price seller is willing to accept | Buying reference | Investor buys at ask |
| Spread | Ask minus bid | Liquidity indicator | Wide spread increases trading cost |
| Market order | Execute immediately at best available price | Speed matters more than price certainty | Execution price may differ from last quote |
| Limit order | Buy/sell only at limit price or better | Price control matters | May not execute |
| Stop order | Becomes market order after stop price reached | Loss control or breakout entry | Execution price not guaranteed |
| Stop-limit order | Becomes limit order after stop price reached | More price control after trigger | May not execute after trigger |
| Day order | Expires if not filled that day | Short-term instruction | Must be re-entered if still desired |
| Good-till-cancelled | Remains open until cancelled or expiry rules apply | Longer-term instruction | Candidate should not assume it lasts forever without platform rules |
| Short sale | Sale of borrowed security | Profit from price decline or hedge | Loss potential can be large if price rises |
| Margin purchase | Borrowing to buy securities | Leverage returns | Magnifies gains and losses |
Derivatives Reference
Derivative Types
| Instrument | Contract Nature | Main Use | Exam Distinction |
|---|
| Forward | Customized OTC agreement to buy/sell later | Hedging or customized exposure | Counterparty risk; not standardized |
| Future | Standardized exchange-traded forward-style contract | Hedging or speculation | Mark-to-market and exchange clearing |
| Call option | Right to buy underlying asset | Bullish exposure or hedging short exposure | Buyer has right, not obligation |
| Put option | Right to sell underlying asset | Bearish exposure or portfolio protection | Buyer has right, not obligation |
| Warrant | Issuer-created right to buy shares | Financing sweetener or leveraged equity exposure | Exercise creates new shares |
| Right | Short-term right for existing shareholders | Maintain ownership in new issue | Usually shorter life than warrant |
Option Payoff Logic
| Position | Market View | Maximum Loss | Profit Driver |
|---|
| Long call | Bullish | Premium paid | Underlying price rises above strike plus premium |
| Short call | Neutral to bearish | Potentially unlimited | Option expires or falls in value |
| Long put | Bearish / protective | Premium paid | Underlying price falls below strike minus premium |
| Short put | Neutral to bullish | Large if underlying falls significantly | Option expires or falls in value |
| Covered call | Neutral to moderately bullish | Stock downside less premium received | Earn premium; may cap upside |
| Protective put | Bullish but risk-controlled | Premium plus stock downside to protected level | Limits downside below strike |
Option Value Terms
| Term | Meaning | Call Option | Put Option |
|---|
| Strike / exercise price | Price at which underlying may be bought/sold | Buy at strike | Sell at strike |
| Premium | Price of the option | Paid by buyer, received by writer | Paid by buyer, received by writer |
| Intrinsic value | Value if exercised now | Max(0, market price - strike) | Max(0, strike - market price) |
| Time value | Premium minus intrinsic value | Reflects time, volatility, rates, dividends | Reflects time, volatility, rates, dividends |
| In the money | Positive intrinsic value | Market price > strike | Market price < strike |
| At the money | Market near strike | Market approximately strike | Market approximately strike |
| Out of the money | No intrinsic value | Market price < strike | Market price > strike |
Financial Statements
Statement Purposes
| Statement | Shows | Key Question Answered |
|---|
| Balance sheet | Assets, liabilities, shareholders’ equity at a point in time | What does the company own and owe? |
| Income statement | Revenue, expenses, profit over a period | Was the company profitable? |
| Cash flow statement | Cash inflows and outflows over a period | Where did cash come from and go? |
| Statement of changes in equity | Changes in shareholders’ equity accounts | What changed owners’ claim on the business? |
| Notes to financial statements | Accounting policies and details | What assumptions and details explain the statements? |
Accounting Equation
\[
\text{Assets} = \text{Liabilities} + \text{Shareholders' equity}
\]
Income Statement Flow
| Item | Meaning |
|---|
| Revenue | Sales or service income |
| Cost of goods sold | Direct cost of goods sold |
| Gross profit | Revenue minus cost of goods sold |
| Operating expenses | Selling, general, administrative, depreciation, etc. |
| Operating income | Profit from core operations |
| Interest expense | Financing cost |
| Taxes | Income taxes |
| Net income | Profit after expenses, interest, and taxes |
Cash Flow Categories
| Category | Includes | Interpretation |
|---|
| Operating cash flow | Cash from normal operations | Quality of earnings indicator |
| Investing cash flow | Purchase/sale of long-term assets and investments | Expansion or asset sales |
| Financing cash flow | Debt, share issuance, dividends, buybacks | How company raises/returns capital |
| Ratio | Formula | Use | High-Yield Trap |
|---|
| Working capital | Current assets - current liabilities | Short-term liquidity amount | Positive does not guarantee quality of assets |
| Current ratio | Current assets / current liabilities | Short-term liquidity coverage | Too high may mean inefficient asset use |
| Quick ratio | (cash + marketable securities + receivables) / current liabilities | More conservative liquidity | Excludes inventory |
| Debt-to-equity | Total debt / shareholders’ equity | Financial leverage | Industry norms matter |
| Debt ratio | Total liabilities / total assets | Asset financing by liabilities | Higher leverage raises risk |
| Interest coverage | EBIT / interest expense | Ability to pay interest | Uses accounting earnings, not cash alone |
| Gross profit margin | Gross profit / revenue | Production or purchasing profitability | Compare with industry |
| Net profit margin | Net income / revenue | Overall profitability | Can be affected by one-time items |
| Return on assets | Net income / average total assets | Efficiency using assets | Asset-heavy industries differ from asset-light industries |
| Return on equity | Net income / average shareholders’ equity | Return to shareholders | Can rise because of leverage, not only better operations |
| EPS | (net income - preferred dividends) / weighted average common shares | Profit per common share | Use common-share earnings after preferred dividends |
| P/E ratio | Market price per share / EPS | Market valuation | High P/E may mean growth expectations or overvaluation |
| Dividend yield | Annual dividend per share / market price | Cash income rate | Yield rises when price falls, possibly due to risk |
| Payout ratio | Dividends / net income | Portion of earnings paid out | Very high payout may be unsustainable |
| Book value per share | Common equity / common shares outstanding | Accounting value per common share | Not necessarily market value |
Securities Analysis
Fundamental vs Technical
| Approach | Focus | Tools | Best Exam Distinction |
|---|
| Fundamental analysis | Intrinsic value based on business, economy, industry, financials | Ratios, earnings, cash flow, valuation models | Asks what security is worth |
| Technical analysis | Price and volume patterns | Charts, trends, support/resistance, moving averages | Asks what market behaviour suggests |
| Quantitative analysis | Statistical/model-driven security evaluation | Factor models, screening, historical data | Model output depends on assumptions |
| Qualitative analysis | Non-numeric factors | Management quality, brand, governance, competitive position | Important but harder to measure |
Top-Down vs Bottom-Up
| Method | Sequence | Example |
|---|
| Top-down | Economy → industry → company | Choose sectors likely to benefit from rate cuts, then select companies |
| Bottom-up | Company → industry/economy context | Find strong companies regardless of macro view |
Industry and Company Analysis
| Factor | Why It Matters |
|---|
| Industry life cycle | Growth, maturity, and decline affect valuation and risk |
| Competitive position | Strong market share or cost advantage may support margins |
| Revenue stability | Stable revenue can support dividends and debt service |
| Operating leverage | High fixed costs magnify earnings changes when sales change |
| Financial leverage | Debt magnifies shareholder returns and risk |
| Management quality | Strategy, capital allocation, and governance affect long-term value |
| Dividend policy | Signals income orientation, maturity, and capital needs |
Risk and Return Concepts
| Risk Type | Meaning | Example |
|---|
| Market risk | Overall market decline | Equity index selloff |
| Specific / unsystematic risk | Company- or industry-specific risk | Product failure, lawsuit, management issue |
| Interest rate risk | Price sensitivity to rate changes | Bond price falls when yields rise |
| Inflation risk | Purchasing power erosion | Fixed coupon income buys less over time |
| Credit risk | Borrower may default | Corporate bond downgrade |
| Liquidity risk | Cannot sell quickly at fair price | Thinly traded small-cap stock |
| Currency risk | Exchange rate movement affects CAD return | U.S. stock falls in CAD terms due to USD weakness |
| Political/regulatory risk | Rule or policy changes affect value | Tax or sector regulation change |
| Reinvestment risk | Cash flows reinvested at lower rates | Callable bond redeemed after rates fall |
| Business risk | Operating performance uncertainty | Sales decline or margin compression |
| Financial risk | Risk from debt financing | Higher interest burden in weak economy |
Diversification Rules
| Concept | Meaning | Exam Cue |
|---|
| Diversification | Combining securities to reduce unsystematic risk | Does not eliminate market risk |
| Correlation | Degree to which returns move together | Lower correlation improves diversification benefit |
| Systematic risk | Market-wide risk | Cannot be diversified away fully |
| Risk premium | Extra expected return for taking risk | Higher risk requires higher expected return |
Common Exam Traps
| Trap | Correct Thinking |
|---|
| “Guaranteed” means no risk | Guarantees depend on issuer/backer and may not eliminate inflation, liquidity, or opportunity risk |
| Bond coupon equals investor return | Return depends on purchase price, yield, reinvestment, and sale/maturity value |
| Preferred shares are debt | Preferred shares are equity with priority features |
| A high dividend yield always means a bargain | It may reflect a falling share price and dividend risk |
| CIPF protects market value | CIPF is insolvency-related protection for eligible client property, not market-loss insurance |
| CDIC covers mutual funds | CDIC covers eligible deposits at member institutions, not securities such as mutual funds, stocks, or bonds |
| Current yield equals YTM | Current yield ignores capital gain/loss to maturity |
| Option writer has the right to exercise | Option buyer has the right; writer has the obligation if assigned |
| Net income equals cash flow | Accrual accounting includes non-cash items and timing differences |
| Higher ROE is always better | ROE can be boosted by leverage, which increases risk |
| Market order guarantees price | Market order prioritizes execution, not price |
| Limit order guarantees execution | Limit order controls price, not execution |
Rapid Calculation Checklist
Before answering a CSC Exam 1 calculation item, identify:
- What is being asked? Yield, price, ratio, accrued interest, EPS, valuation, option intrinsic value.
- What time period is used? Annual, semi-annual, quarterly, daily accrual.
- Which value is the denominator? Market price, par value, assets, equity, revenue, shares.
- Are preferred dividends involved? Subtract them before calculating EPS for common shareholders.
- Is the bond quoted clean or full? Add accrued interest if calculating total settlement amount.
- Is the option a call or put? Call benefits when underlying rises; put benefits when underlying falls.
- Is the position long or short? Buyer pays premium and has rights; writer receives premium and has obligations.
Last-Week Review Priorities
| Priority | What to Do |
|---|
| 1 | Rework all bond price/yield and accrued interest examples until the inverse relationship is automatic |
| 2 | Memorize the equity and financial statement ratios with denominator discipline |
| 3 | Drill call/put payoff tables and long/short rights versus obligations |
| 4 | Compare investor protections: CIPF vs CDIC vs normal market risk |
| 5 | Review business cycle, monetary policy, fiscal policy, and yield curve implications |
| 6 | Practise order-type scenarios: market, limit, stop, stop-limit, short sale, margin |
| 7 | For every practice error, write the missed rule in one sentence and retest it the next day |
Practical Next Step
Use this Quick Reference to identify weak areas, then complete a timed set of original CSC Exam 1-style practice questions focused on calculations, market terminology, fixed income relationships, and applied scenario wording.