chapter 6 part 7

Question 1

what is a bankers acceptance?

Answer 1

it is a commercial draft. like a T-bill they are sold at a discount to the redemption price. Sold in denominations of 1000$ with a minimum investment of 25,000$. They have terms of 30 and 90 days with some being 365 days.

Question 2

what is Commercial paper?

Answer 2

Same as bankers acceptance but sold on the secondary markets

Question 3

what is a term deposit?

Answer 3

a guaranteed rate for a short-term deposit. usually up to one year. with penalties if withdrawn early

Question 4

What is a guaranteed investment certificate?

Answer 4

a loan with a fixed rate of interest and specific maturity date. Can be non-redeemable or redeemable. Redeemable have lower interest rates as they can be cashed in early.

the canadian deposit insurance cooperation does not guarantee terms over 5 years.

Question 5

What are five GIC special features?

Answer 5

1. Escalating rate GIC’s
2. Laddering GIC’s
3. Instalment GIC’s
4. Index-linked GIC’s
5. Interest-rate-linked GIC’s

Question 6

Why are fixed-income mutual funds and etfs that specialize in bonds getting more popular?

Answer 6

because of market uncertainty and low interest rates

Question 7

What are the credit quality ratings?

Answer 7

AAA best 
AA
A
BBB adequate
BB speculative 
B highly speculative

CCC/CC/C
little difference between these. Defaulting can be considered inevitable to many C ratings

D
Defaulted. filed for bankruptcy