Chapter 17 Flashcards
money
anything that is acceptable as payment for goods and services
currency
bank notes and coins used as a medium of exchange
demand deposits
money kept in chequing accounts that can be withdrawn by depositors on demand
time deposits
money invested for a specific period of time
term deposits
deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand
open market operations
the purchase or sale of Canadian government securities by the Bank of Canada to stimulate or slow down the economy
bank rate
the interest rate that the Bank of Canada charges on one-day loans to financial institutions
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
four pillars of the Canadian financial system
the four pillars of the Canadian financial system refers to banks, trust companies, insurance companies, and investment dealers
financial intermediation
the process in which financial institutions act as intermediaries between the suppliers and demanders of funds
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
trust company
a financial institution that conducts the same activities as a bank but can also administer estates, trusts, pension plans, and agency contracts
credit unions and caisses populaires
not-for-profit, member-owned financial cooperatives
pension funds
large pools of money set aside by corporations, unions, and governments for later using in paying retirement benefits to their employees or members
Canada Deposit Insurance Corporation (CDIC)
the Canada Deposit Insurance Corporation (CDIC) is a federal Crown Corporation created in 1967 to provide deposit insurance and contribute to the stability of Canada’s financial system
securities
investment certificates issued by corporations or governments that represent either equity or debt
bonds
securities that represent a long-term debt obligation (liabilities) issued by corporations or governments
interest (coupon rate)
a fixed amount of money paid by the issuer of a bond to the bondholder on a regular schedule, typically every six months; stated as the coupon rate
principal (par value)
the amount borrowed by the issuer of a bond; also called the par value
high-yield (junk) bonds
high-risk, high-return bonds
secured bonds
corporate bonds for which specific assets have been pledged as collateral
mortgage bonds
corporate bonds that are secured by property, such as land, equipment, or buildings
debentures
unsecured bonds that are backed only by the reputation of the issuer and its promise to pay the principal and interest when due
convertible bonds
corporate bonds that are issues with an option that allows the bondholder to convert them into common shares
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)
mutual fund
a financial service company that pools its investors’ funds to buy a selection of securities that meet its stated investment goals
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. ETFs are similar to mutual funds but trade like shares
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
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
institutional investors
investment professionals who are paid to manage other peoples’ money
investment bankers
companies that act as intermediaries, buying securities from corporations and governments and reselling them to the public
underwriting
the process of buying securities from corporations and governments and reselling them to the public with the aim of reselling them at a higher price; the main activity of investment bankers
stockbroker
a person who is licensed to buy and sell securities on behalf of clients
primary market
the securities market where new securities are sold to the public, usually with the help of investment bankers
secondary market
the securities market where old (already issued) securities are bought and sold, or traded, among investors
broker markets or organized stock exchanges
organizations on whose premises securities are resold by using an auction-style trading system
dealer markets
securities markets where buy and sell orders are executed through dealers, or “market makers” linked by telecommunications networks
National Association of Securities Dealers Automated Quotation (NASDAQ) system
the first electronic-based stock market and the fastest-growing part of the stock market
over-the-counter (OTC) market
a sophisticated telecommunications network that links dealers and enables them to trade securities
bull markets
markets in which securities prices are rising
bear markets
markets in which securities prices are falling
