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CFA Investment Foundation Program Terms
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The CFA Institute Investment Foundations Program covers the essentials of finance, ethics, and investment roles, providing a clear understanding of the global investment industry.

CFA Investment Foundation Program Terms
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1. Ceiling price for a buy order and floor price for a sell order. A trade cannot be arranged at a price higher than the specified limit price when buying or a price lower than the specified limit price when selling.

2. Bonds rated BBB– or higher by Standard & Poor’s and Fitch or Baa3 or higher by Moody’s.

3. The exchange of an initial amount for a fixed number of future payments of a certain amount.

4. Financial intermediaries, such as banks and insurance companies, whose role is to collect money from savers and to invest it in financial assets.

5. Term structure of interest rates presented in graphical form.

6. Cash or securities that are pledged as collateral.

7. A transaction in which a company distributes additional shares of its common stock to shareholders instead of cash. This transaction reduces the number of shares outstanding but does not affect the company’s value because the stock price decreases accordingly.

8. A profitability ratio that indicates how much (percentage) of each monetary unit of revenue is left after all costs and expenses are covered.

9. All activities that occur from the arrangement of the trade to its settlement.

10. A measure, in the same units as the original data, of the variability, volatility, or dispersion of a data set around the average value of that data set (i.e., the arithmetic mean). It is the positive square root of the variance.

11. The extent to which fixed costs are used in production. The higher the fixed costs relative to variable costs, the higher the operating leverage.

12. The amount charged (and expected to be received) for the delivery of products or services in the ordinary activities of a business.

13. Managers who follow a buy-and-hold approach and seek to match the return and risk of a benchmark.

14. The economic principle that the gain in output from adding variable inputs of one factor, such as labour, will increase at a decreasing rate even if the fixed inputs of production remain unchanged.

15. A component of the balance of payments that reflects investments domestic entities make in foreign entities and investments foreign entities make in domestic entities. It includes direct investments, portfolio investments, other investments, and the reserve account.

16. The money initially lent on which interest is paid.

17. Physical assets, such as land, buildings, machinery, cattle, and gold.

18. The practice of combining assets and types of assets with different characteristics in a portfolio for the purpose of reducing risk.

19. In economics, how the quantity demanded or supplied changes in response to small changes in a related factor, such as price, income, and the price of a substitute or complementary product.

20. Minimum annual rate of return that the fund must generate before the investment manager can receive a performance fee.

21. Reflects the price changes experienced by domestic producers in a country.

22. Difference between the best bid price and the best offer price.

23. A bond with a finite life that offers a coupon rate that does not change over the life of the bond. Also known as straight bonds.

24. A measure of the strength of a relationship between two variables; essentially, two variables are correlated when a change in one variable is always accompanied by a change in another variable. Variables can be positively or negatively correlated.

25. Limits that incorporate an organisation’s overall risk tolerance and risk management strategy—for example, the maximum amount of a risky security that can be held or the maximum aggregate exposure to one asset type or to one counterparty.

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