Chapter #2

Question 1

What would typically reduce the attractiveness of a country for foreign investment?

Answer 1

New taxes on foreign direct investment

Question 2

What is a direct use of capital savings?

Answer 2

Building a hospital, buying a home, plant produces a new product.

Question 3

What is capital?

Answer 3

Wealth (property, material things, stocks/bonds)

And

Invested savings

Question 4

What is indirect us of capital savings?

Answer 4

Buying stocks/bonds, mutual funds or deposit into bank

Question 5

What is 3 characteristics of capital

Answer 5

Mobile

Sensitive to it’s environment

Scarce

Question 6

Which exchange in Canada deals exclusively with financial and equity futures and options?

Answer 6

The Montreal Exchange

Question 7

Primary Market

Answer 7

New securities sold by companies or the government to investors for the the first time

• buy directly from companies / government
• Initial Public Offering (IPO)

Question 8

Secondary Market

Answer 8

Investors trade securities that have already been issued by the company / government

• buyer and sellers trade to where it is mutually benefical
• company / government does not receive any of the proceeds from the transacrion

Question 9

Auction Markets

Answer 9

Buyers enter bids and sellers enter offers for a stock

• the price a stock is sold at is the highest the buyer is willing to pay and the lowest price the seller is willing to accept

Question 10

Canadian Exchanges / Stock Exchange

Answer 10

Buyer and sellers of securities meet to trade and where the prices are established by the laws of supply vs. demand

Question 11

Liquid Market / Liquidity

Answer 11

Frequent sales

Narrow difference between bid and ask prices

Small price fluctuations sale to sale

Question 12

Dealer Market

Answer 12

Network of dealers who trade with each other

• negotiated market
• almost all bonds and debentures are sold in this market

Also know as OVER THE COUNTER
UN-LISTED MARKETS

Question 13

IIROC

Answer 13

Investment Industry Regulatory Organization of Canada

• is the self regulatory organization which over sees all investment dealers and trading activity in Canada
• carries out all regulatory responsibilities, setting enforcement rules
• all investment dealers must be members of the IIROC

Question 14

MFDA

Answer 14

Mutual Fund Dealers Association

Mutual funds version of Self Regulatory Organization for distribution

Does not regulate funds itself (this responsibility is the securities commissions)

Question 15

SRO

Answer 15

Self Regulatory Organization

Private industry organizations that have been given permission to regulate their own members by provincial regularity bodies