Chapter 17 Flashcards Preview

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Flashcards in Chapter 17 Deck (64):
1

money

anything that is acceptable as payment for goods and services.

2

currency

bank notes and coins used as a medium of exchange

3

demand deposits

money kept in chequing accounts that can be withdrawn by depositors on demand.

4

time deposits

money invested for a specific period of time.

5

term deposits

deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand.

6

The new Canadian bank notes are

secure, durable and innovative (polymer)

7

open market operations

the purchase or sale of Canadian government securities by the Bank of Canada to stimulate or slow down the economy.

8

bank rate

the interest rate that the bank of Canada charges on one-day loans to financial institutions.

9

target for the overnight rate

the signal to the major participants in the money market as to what the Bank of Canada is aiming for when participants borrow and lend one-day funds to each other.

10

four of the pillars of the Canadian financial system

refers to banks, trust companies, insurance companies, and investment dealers.

11

financial intermediation

the process in which financial institutions act as intermediaries between the suppliers and demanders of funds.

12

chartered banks

profit-oriented financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services.

13

trust companies

a financial institution that conducts the same activities as a bank but can also administer estates, trusts, pension plans and agency contracts.

14

credit unions and caisses populaires

not-for-profit, member owned financial cooperatives.

15

pension funds

large pools of money set aside by corporations, unions, and governments for later use in paying retirement benefits to their employees or members.

16

Canada Deposit Insurance Corporation (CDIC)

The Canada Deposit Insurance Corporation is a federal crown corporation created in 1967 to provide deposit insurance and contribute to the stability of Canada's financial system.

17

Securities

Investment certificates issued by corporations or governments that represent either equity or debt

18

Bonds

Securities that represent a long-term debt obligation (liabilities) issued by corporations or governments

19

Interest

A fixed amount of money paid by the issuer of a bond to a bondholder on a regular schedule, typically every six months; stated as the coupon rate

20

Principal

The amount borrowed by the issuer of a bond; also called par value

21

High-yield (junk) bonds

High-risk, high-return bonds

22

Secured bonds

Corporate bonds for which specific assets have been pledged as collateral

23

Mortgage bonds

Corporate bonds that are secured by property, such as land, equipment, or buildings

24

Debentures

Unsecured bond that are backed only by the reputation of the issuer and it's promise to pay the principal and interest when due.

25

Convertible bonds

Corporate bonds that are issued with an option that allows the bondholder to convert them into common shares.

26

Bond ratings

Letter grades assigned to bond issues to indicate their quality, or level of risk; assigned by rating agencies such as Moody's and Standard & Poor's (S&P)

27

Mutual fund

A financial service company that pools it's investors' funds to buy a selection of securities that meet it's stated investment goals. they are a convenient way of diversifying and are professionally managed.

28

Canada Deposit Insurance Corporation (CDIC)

The Canada Deposit Insurance Corporation is a federal crown corporation created in 1967 to provide deposit insurance and contribute to the stability of Canada's financial system.

29

Securities

Investment certificates issued by corporations or governments that represent either equity or debt

30

Bonds

Securities that represent a long-term debt obligation (liabilities) issued by corporations or governments. Interest is paid out periodically and principal paid back at maturity. Bonds provide a steady source of income and the potential for price appreciation if interest rates fall below the coupon rate. Rising interest rates can erode the bond price.

31

Interest

A fixed amount of money paid by the issuer of a bond to a bondholder on a regular schedule, typically every six months; stated as the coupon rate

32

Principal

The amount borrowed by the issuer of a bond; also called par value

33

High-yield (junk) bonds

High-risk, high-return bonds

34

Secured bonds

Corporate bonds for which specific assets have been pledged as collateral

35

Mortgage bonds

Corporate bonds that are secured by property, such as land, equipment, or buildings

36

Debentures

Unsecured bond that are backed only by the reputation of the issuer and it's promise to pay the principal and interest when due.

37

Convertible bonds

Corporate bonds that are issued with an option that allows the bondholder to convert them into common shares.

38

Bond ratings

Letter grades assigned to bond issues to indicate their quality, or level of risk; assigned by rating agencies such as Moody's and Standard & Poor's (S&P)

39

Mutual fund

A financial service company that pools it's investors' funds to buy a selection of securities that meet it's stated investment goals

40

Exchange traded fund (ETF)

A basket of marketable securities in a category, such as an industry sector, an investment objective, or a geographical area, or that track an index. ETF's are similar to mutual funds but trade like shares.

41

Futures contracts

Legally binding obligations to buy or sell specified quantities of commodities or financial instruments at an agreed-on price at a future date. They are very risky since price or financial instrument can change drastically.

42

Options

Contracts that entitle holders to buy or sell specified quantities of common shares or other financial instruments at a set price during a specified time. a high-risk investment.

43

Institutional investors

Investment professionals who are paid to manage other people's money.

44

Investment bankers

Companies that act as intermediaries, buying securities from corporations and governments and reselling them to the public.

45

Underwriting

The process of buying securities from corporations and governments and reselling them to the public, with the aim of reselling at a higher price; the
Main activity of investment bankers.

46

Stockbroker

A person who is licensed to buy and sell securities on behalf of clients.

47

Primary market

The securities market where new securities are sold to the public, usually with the help of investment bankers.

48

Secondary market

The securities market (already issued) securities are bought and sold, or traded among investors.

49

Broker markets or organized stock exchanges

Organizations on whose premises securities are resold by using an auction-style trading system.

50

Dealer markets

Securities markets where buy and sell orders are executed through dealers, or "market makers" linked by telecommunications networks.

51

National Association of Securities Dealers Automated Quotation (NASDAC) system

The first-electronic based stock market and the fastest growing part of the stock market. Dealers and brokers perform trades quickly and efficiently.

52

Over the counter (OTC) market

A sophisticated telecommunications network that links dealers throughout North America and enables them to trade securities.

53

Bull markets

Markets in which securities prices are rising.

54

Bear markets

Markets in which securities prices are falling

55

Characteristics of money

Money should be scarce, durable, portable, and divisible. Money functions as a medium of exchange, a standard of value and a store of value. The Canadian money supply consists of currency, demand deposits (chequing accounts) and time deposits (interest-bearing deposits that can't be withdrawn on demand).

56

Functions of the Bank of Canada

The Bank of Canada promotes economic and financial welfare of Canada by: conducting monetary policy in a way that fosters confidence in the value of money; supplying quality bank notes; promoting the safety and efficiency of Canada's financial system; providing efficient and effective funds management services; communicating their objectives openly and effectively, and standing accountable for their actions.

57

Key financial institutions are

depository institutions and non-depository institutions.

58

Depository institutions are

chartered banks, trust companies, credit unions and caisses populaires.

59

Non-depository institutions are

insurance companies, pension funds, brokerage companies and finance companies. Financial institutions ease the transfer of funds between suppliers and demanders.

60

Canadian banks' role in the international market

Canadian banks provide loans and trade-related services to foreign governments and businesses. helping with cash management and foreign currency exchange

61

Common and preferred shares represent

ownership - equity in a corporation. Common shares have voting rights, but their claim on profits and assets rank behind holders of other securities. Preferred shares receive a stated dividend and is disbursed before common shares.

62

Order of claims on income or assets

Bonds (creditors to issuer), preferred shareholders, common shareholders

63

Securities markets allow

shares, bonds and other securities to be bought and sold quickly and at a fair price.

64

securities are resold

on organized share exchanges, such as the Toronto Stock Exchange and regional share exchanges.