Glossary of Investment Terms

Call Option   An investment product that gives you the right to purchase shares at a predetermined price for a limited period of time.

Capacity Utilization Rate   Is the percentage of total available industrial capacity in the economy (plant and equipment) that is being used to produce goods.

Capital Gains  A capital gain arises when an investment is sold at a higher price than originally paid. In a mutual fund, capital gains are created when the fund buys and sells securities. These gains are then distributed to unitholders at least annually. Unitholders can also earn capital gains by redeeming their units at higher prices than they originally paid.

Convertible Bond  A bond that may be exchanged, usually for the common stock of the same company as stipulated by the terms of the conversion privilege.

Correction   A market correction is usually a sudden temporary decline in stock or bond prices after a period of market strength. A 10% movement on the downside that lasts no longer than six months is a normal correction.

CPI Consumer Price Index  is used to measure inflation. It monitors the price of a basket of goods to establish the general direction of prices in an economy.

Currency Forward Contract   An agreement for the future delivery of some amount of currency at a specified price and time. These contracts are traded over-the-counter by direct contact between a buyer and a seller.

Currency Futures Contract   An agreement between a buyer or seller and a futures exchange in which the buyer or seller agrees to take or make delivery of a specified amount of currency at a specified price at a designated time.

Currency Options Contract   A contract which gives the holder the right, but not the obligation, to buy or sell currency for a specified price for a stated period of time. These contracts are traded over-the-counter or on exchanges.

Currency Risk  This refers to the possibility that the domestic currency will appreciate relative to the foreign currency in which investments are denominated and a loss will be incurred on exchange back into the domestic currency.

Current Account   The record of all transactions with foreign nations that involve the exchange of goods and services or unilateral gifts.

Cyclical Companies   Those companies that tend to follow overall economic cycles. They report strong earnings when the overall economy is doing well and weaker earnings when the economy is in a recession.