Chapter 17 Flashcards
Define Money
Anything that is an acceptable form of payment.
Define Currency
Bank notes and coins used as a medium of exchange
Define Demand Deposits
Money kept in checking accounts that can be withdrawn by depositors on demand.
Define Time Deposits
Money invested for a specific time
Define Term Deposits
Deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand.
Define Open Market Operations
The purchase or sale of Canadian government securities by the Bank of Canada to stimulate or slow down the economy.
Define Bank Rate
The interest rate that the Bank of Canada charges on one-day loans to financial institutions.
Define 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.
Denise Four Pillars of the Canadian Financial System
The country’s banks, trust companies, insurance companies, and investment dealers.
Define Financial Intermediation
The process in which financial institutions act as intermediaries between the suppliers and demanders of funds.
Define 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.
Define Trust Company
A financial institution that conducts the same activities as a bank but can also administer estates, trusts, pension plans and agency contracts.
Define Credit unions and causes populaires
Not for profit, member owned financial cooperatives
Define Pensions Funds
Large pools of money set aside y corporations, unions, and governments for later use in paying retirement benefits to their employees or members.
Define Canada Deposit Insurance Corporation (CDIC)
A federal Crown corporation created in 1967 to provide deposit insurance and contribute to the stability of Canada’s financial system.
Define Securities
Investment certificates issued by corporations or governments that represent either equity or debt.
Define Common Shares
The most widely form of ownership with the right of owner (shareholder) to vote on important corporate decisions.
Define Dividends
Profits of the company that are distributed to the shareholders
Define Preferred Shares
Shares, that unlike common shares, have a specified fixed dividend but typically not a voice in management.
Define Bonds
Securities that represent a long-term debt obligations (liabilities) issued by corporations or governments.
Define Interest
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.
Define Principal
The amount borrowed by the issuer of a bond; also called par value.
Define High-Yield (junk) bonds
Hight risk; High return bonds
Define secured bonds
Corporate bonds for which specific assets have been pledged as collateral.
Define mortgage bonds
Corporate bonds that are secured by property, such as land, equipment or buildings.
Define Debentures
Unsecured bonds that are backed only by the reputation of the issuer and its promise to pay the principal and interest when due.
Define Convertible Bonds
Corporate bonds for which specific assets have been pledged as collateral.
Define 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 and Poor’s (S&P)
Define Mutual Fund
A financial services company that pools its investors funds to buy a selection of securities that meet its stated investment goals.
Define 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; similar to mutual funds but trade like shares.
Define 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
Define 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.
Define Institutional Investors
Investment professionals who are paid to manage other people’s money.
Define Investment Bankers
Companies that act as intermediaries buying securities from corporations and governments and reselling them to the public.
Define Underwriting
The process of buying securities from corporations and governments and reselling them to the public to make a profit. Main activity of investment bankers.
Define Stockbroker
A person who is licensed to buy and sell securities on behalf of clients.
Define Primary Market
The securities market where new securities are sold to the public, usually with help of investment bankers.
Define secondary market
The securities market where old (already issued) securities are bought and sold or traded, among investors.
Define Broker markets or organized stock exchanges
Organizations on whose premises securities are resold by using an auction style trading system.
Define 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 which securities prices are rising
Bear Markets
Markets which securities prices are falling.
