Economic Factors Flashcards
(36 cards)
What are the 4 pillars of the Canadian financial system?
1) chartered banks
2) alternate banks
3) specializes lending, saving intermediaries
4) investment dealers
What is the Canadian financial system
Facilitate the flow of money, they control trade, deposits, loans
Describe chartered banks, their roles and who they serve
Profit seeking companies
Highly regulated, high barriers
Bank act limits foreign banks
Serve individuals and businesses
Source of Short term loans for businesses
Role: make deposits, bottom, source of small and medium companies
Describe alternate banks
Trust companies; protect bond holders interests, certified investors that stock issues are correctly stated
Credit unions: savings and lending associations formed by a group with common interests
Describe specialized lending/ saving intermediaries
Insurance companies Venture capitalist firms Pension funds They take money you give them and invest it Role: specializes lending/ saving Mid to large enterprises
Describe investment dealers
Facilitate trade of stock, bonds and other products in security markets
1) primary- investment dealers/ bankers
2) secondary- toronto stock exchange
Role: investment dealer for large and established
What is a bond?
Legal, binding agreement, represents debt for issuing corporation, gov, will have to pay back w interest
What is the approximate yield to market formula
What you made/ what you paid
Rate of return definition
Often paid semi- annually
Coupon
What is a fixed term
The principal paid at mature (face value and maturity date)
What do bond holders have priory over?
Stockholders
How do you calculate interest with a bond?
(Coupon rate) (face value)
How do you calculate capital gain?
Face value- purchase price
What factors affect bond prices
1) environment: prevailing interest rates
2) company: credit rating
3) product: features/ coupon rate relative to equally risky investments
What are stocks?
Represents equity/ capital for the issuing company. Investors get voting rights, no fixed term, variable return, dividends
What is a common stock
You have voting rights BUT there are no fixed payments, dividends discretionary
What is a preferred stock?
You have no voting rights, your payments are promised but not legally required, dividends are % of par value
What impacts the stock prices?
1) environment: bull vs. Bear market
2) environment: industry conditions, competitors, consumers
3) company; choices- strategies/ changes to diamond E
What are the 2 market conditions?
Bull vs bear
What is margin buying?
The purchase of an asset by using leverage and borrowing balance from a broker, created potential to make a longer return
What are the 4 margin buying rules
1) quality for margin account
2) sign marking account agreement form
3) must pay interest on loans
4) the investors % equity must always be greater than/ equal to the minimum margin requirement
What variable are you usually using in calculating margin transactions?
X
Do you calculate interest on margin transactions?
Yes- on loan, whatever margin account
Do you calculate commissions on margin transactions?
Yes
