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Paper Profit

An unrealized profit on a security still held. Paper profits become realized profits only when the security is sold. A paper loss is the opposite to this.

Par Value

The stated face value of a bond or stock (as assigned by the company's charter) expressed as a dollar amount per share. Par value of a common stock usually has little relationship to the current market value and so "no par value" stock is now more common. Par value of a preferred stock is significant as it indicates the dollar amount of assets each preferred share would be entitled to in the event of winding up the company.

Pari Passu

In equal proportion. Usually refers to equally ranking issues of a company's preferred shares.

Participating Feature

Some preferred shares which, in addition to their fixed rate of prior dividend, share with the common in further dividend distributions and in capital distributions above their par value in liquidation.

Penny Stocks

Low-priced speculative issues selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment calibre issues.

Piggy Back Warrants

A second series of warrants acquired by holders on the exercise of primary warrants sold as part of a unit.


Refers to security prices. In the case of shares, it means $1 per share. In the case of bonds and debentures, it means 1% of the issue's par value which is almost universally 100. On a $1,000 bond, one point represents 1% of the face value of the bond or $10.

Pooling of Interest

Occurs when a company issues treasury shares for the assets of another company so that the latter becomes a division or subsidiary of the acquiring company. Subsequent accounts of the parent company are set up to include the retained earnings and assets at book value (subject to certain adjustments) of the acquired company.


Holdings of securities by an individual or institution. A portfolio may contain debt securities, preferred and common stocks of various types of enterprises and other types of securities.

Preferred Stock

A class of share capital that entitles the owners to a stated dollar value per share in liquidation and a fixed dividend ahead of the company's common shares. Preferred shares usually have voting rights only when a stated number of dividends have been omitted.


The amount by which a preferred stock or debt security may sell above its par value. In the case of a new issue of bonds or stocks, premium is the amount the market price rises over the original selling price. Also refers to that part of the redemption price of a bond or preferred share in excess of face value, par value or market price. In the case of options, the price paid by the buyer of an option contract to the seller.

Price Earnings Ratio

A common stock's current market price divided by its annual per share earnings.

Primary Distribution or Primary Offering of a New Issue

The original sale of any issue of a company's securities.

Prime Rate

The interest rate chartered banks charge to their most credit-worthy borrowers.


The person for whom a broker executes an order, or a dealer buying or selling for his own account. The term principal may also refer to a person's capital or to the face amount of a bond.

Prior Preferred

A preferred stock which in liquidation of the issuing company would rank ahead of other classes of preferred shares as to asset and dividend entitlement.

Private Placement

The underwriting of a security and its sale to a few buyers, usually institutional, in large amounts.

Pro Forma

A term applied to a document drawn up after giving effect to certain assumptions or contractual commitments not yet completed. For example, an issuer of new securities is required to include in the prospectus a statement of its capitalization on a pro forma basis after giving effect to the new financing.

Pro Rata

In proportion to. For example, a dividend is a pro rata payment because the amount of dividend each shareholder receives is in proportion to the number of shares he owns.

Profit Taking

Selling to take a profit - the process of converting paper profits into cash.

Program Trading

A sophisticated computerized trading strategy whereby a portfolio manager attempts to earn a satisfactory short-term return from the price spreads between a designated stock index, e.g., the Standard & Poor 500 Index in the U.S.A., and the price at which futures contracts (or options on the futures contract) on the index trade in financial futures markets.


A legal document which describes securities being offered for sale to the public. Must be prepared in conformity with requirements of applicable securities commissions. (See Draft Prospectus, Red Herring and Final Prospectus.)


Written authorization given by a shareholder to someone else, who need not be a shareholder, to represent him or her and vote his or her shares at a shareholders' meeting.

Prudent Man Rule

An investment standard. In some provinces, the law requires that a fiduciary, such as a trustee, may invest funds only in a list of securities designated by the province or the federal government. (See Legal Investment.) In other provinces, the trustee may invest in a security if it is one which an ordinary prudent man would buy if he were investing for the benefit of other people for whom he felt morally bound to provide. Most provinces apply the two standards.

Purchase and Resale Agreement

The method by which Country Banks lend temporarily idle funds to money market dealers. The country bank buys short-term securities from the money market dealer who agrees to repurchase the securities from the country bank at a higher price at a specified date in the future.

Purchase Fund

A fund set up by a company to retire through purchases in the market a specified amount of its outstanding preferred shares if purchases can be made at or below a stipulated price.


During a stock split, if new shares are forwarded by the Transfer Agent directly to the registered holders of old share certificates - without the necessity of surrendering the old shares - the process is commonly known as a push-out. Both old and new shares henceforth have equal value.

Puts and Calls

Options which give the holder the right, but not the obligation, to sell or buy a fixed amount of a certain stock at a specified price within a specified time. A put gives the holder the right to sell the stock; a call the right to buy the stock. Puts are generally purchased by those who think a stock may go down; calls by those who expect a price increase. Exchange-traded options on bonds, currencies, precious metals, commodities and stock indices are available.


See Cross on the Board.

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