Chapter 17 Flashcards Preview

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Flashcards in Chapter 17 Deck (37):
1

bank rate

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

2

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.

3

four of the pillars of the Canadian financial system

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

4

trust companies

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

5

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

6

Principal

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

7

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.

8

Convertible bonds

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

9

Bond ratings

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

10

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.

11

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.

12

Securities

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

13

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.

14

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

15

Principal

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

16

High-yield (junk) bonds

High-risk, high-return bonds

17

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.

18

Convertible bonds

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

19

Bond ratings

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

20

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

21

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.

22

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.

23

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.

24

Institutional investors

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

25

Investment bankers

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

26

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.

27

Primary market

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

28

Secondary market

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

29

Broker markets or organized stock exchanges

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

30

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.

31

Bull markets

Markets in which securities prices are rising.

32

Bear markets

Markets in which securities prices are falling

33

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.

34

Non-depository institutions are

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

35

Order of claims on income or assets

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

36

Securities markets allow

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

37

securities are resold

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