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CSC 2 Flashcards

1
Q

Identify the role of capital investment in the economy.

A

Creating growth.

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2
Q

Non-financial domestic corporations are sources of capital. Identify what role these corporations play in the capital markets.

A

Not significant providers of permanent funds.

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3
Q

Identify the typical role of foreign investors in Canadian Capital markets.

A

Direct investment in Canadian industries.

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4
Q

Which of the markets below are dealer markets and which one are auction markets?: Bond and debenture markets

A

Dealer

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5
Q

Which of the markets below are dealer markets and which one are auction markets: TSX, ME, TSX Venture

A

Auction

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6
Q

Which of the markets below are dealer markets and which one are auction markets: CUB

A

Dealer

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7
Q

Which of the markets below are dealer markets and which one are auction markets: Transaction between principals (market makers)

A

Dealer

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8
Q

Which of the markets below are dealer markets and which one are auction markets: Major stock markets in Canada

A

Auction

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9
Q

Which of the markets below are dealer markets and which one are auction markets: Network of dealers trading with each other over telephones or computers

A

Dealer

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10
Q

Which of the markets below are dealer markets and which one are auction markets: Less regulation for companies traded on this market

A

Dealer

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11
Q

Which of the markets below are dealer markets and which one are auction markets: Higher dollar volume of trading

A

Dealer

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12
Q

Which of the markets below are dealer markets and which one are auction markets: No listing requirements for companies trading on this market

A

Dealer

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13
Q

Which of the markets below are dealer markets and which one are auction markets: Transactions are between brokers acting as agents for the buyers and sellers

A

Auction

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14
Q

Which of the markets below are dealer markets and which one are auction markets: Listing requirements to trade on this market

A

Auction

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15
Q

What are the three characteristics of capital?

A

What are the three characteristics of capital?

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16
Q

What is indirect investment

A

The indirect investment process, where investors purchase representational items such as stocks or bonds, is the principal focus of this course.

  • An investor buys stocks or bonds.
  • A parent invests in an education savings plan.
  • A couple deposits their savings at a bank.
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17
Q

What is direct investment

A
  • A couple invests their savings in a home.
  • A government invests in a new highway.
  • A company pays start-up costs for a new plant.
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18
Q

What are the 3 sources of capital

A
  1. Retail investors
  2. Institutional investors
  3. Foreign investors
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19
Q

Source of Capital: Foreign investors

A

Foreign direct investment in Canada tends to concentrate in manufacturing, petroleum, natural gas, mining, and smelting. Some industries have restrictions on foreign investment.

20
Q

Source of Capital: Institutional investors

A

Institutional investors are organizations, such as pension and mutual fund companies, that trade in large-share quantities or dollar amounts. They typically have a steady flow of money to invest.

21
Q

Source of Capital: Retail investors

A

Retail investors are individual clients who buy and sell securities for their personal accounts.

22
Q

3 Users of Capital

A
  1. Individuals
  2. Businesses
  3. Governments
23
Q

Users of Capital: Individuals

A

Individuals need capital to finance large purchases such as houses, cars, and major appliances. They usually obtain it in the form of personal loans, mortgage loans, and charge accounts.

24
Q

Users of Capital: Businesses

A

Businesses require massive sums of capital to finance day-to-day operations, renew and maintain plants and equipment, and expand and diversify their activities.
They generate much of that capital internally, in the form of profits retained in the business. They borrow from financial intermediaries for other needs, and they raise the remainder in securities markets.

25
Q

Users of Capital: Governments

A

Governments are major issuers of securities in public markets, either directly or through guaranteeing the debt of their Crown corporations.
When revenues fail to meet expenditures, or when they undertake large capital projects, governments must borrow.

26
Q

Debt Instruments

A

Include government and corporate bonds and mortgages.

27
Q

What are equities?

A

Equities are not traded on the stock exchange and do not involve general public participation. Shareholders own equity of a company.

28
Q

Name exchanges that operate in Canada

A
  1. Toronto Stock Exchange (TSX)
  2. TSX Venture Exchange
  3. TSX Alpha Exchange
  4. Montréal Exchange
  5. ICE NGX Canada
  6. Canadian Securities Exchange
  7. NEO Exchange
29
Q

bid price

A

The bid price is the highest price a buyer is willing to pay for the security being quoted.

30
Q

ask price

A

The ask price (or offer) is the lowest price a seller will accept.

31
Q

bid-ask spread

A

The bid-ask spread is the amount that the ask price exceeds the bid price. Ask Price – Bid Price = Bid-Ask Spread

32
Q

last price

A

The last price is the price at which the last trade occurred on a stock. This price can fluctuate between the bid price and the ask price as buying and selling orders are filled. Note that the last price is not necessarily the price at which a stock can currently be bought or sold. It is simply the latest price at which a transaction occurred.

33
Q

Financial Instrument: Derivatives

A

A derivative is a product whose value is derived from the value of an underlying instrument, such as a stock or an index. Unlike stocks and bonds, derivatives are more suited to sophisticated investors. • Options. • Forwards

33
Q

Financial Instrument: Derivatives

A

A derivative is a product whose value is derived from the value of an underlying instrument, such as a stock or an index. Unlike stocks and bonds, derivatives are more suited to sophisticated investors. • Options. • Forwards

34
Q

Financial Instrument: Fixed-income securities

A

Fixed-income securities (also called debt securities) formalize a relationship in which the issuer promises to repay the loan at maturity and, in the interim, makes interest payments to the investor. The term of the loan varies depending on the type of instrument.
• Treasury bills
• Bonds

35
Q

Financial Instrument: Equity securities

A

Equity securities (commonly called stocks, equities, or shares) represent some form of ownership stake in the company that issued them. For example, if the value
of a company increases, the owner of stock in that company receives a capital gain upon selling it.
• Common stock (also called common shares)
• Preferred shares

35
Q

Financial Instrument: Equity securities

A

Equity securities (commonly called stocks, equities, or shares) represent some form of ownership stake in the company that issued them. For example, if the value
of a company increases, the owner of stock in that company receives a capital gain upon selling it.
• Common stock (also called common shares)
• Preferred shares

36
Q

Financial Instrument: Managed products

A

Managed products (also called investment funds) are typically pools of capital gathered from investors to buy securities according to a specific investment mandate.
• Mutual funds
• Exchange-traded funds
• Private equity funds

37
Q

Financial Instrument: Structured products

A

A structured product is a financially engineered product with the characteristics of debt, equity, and an investment fund.
• Principal-protected notes
• Index-linked guaranteed investment certificates

38
Q

Dealer market

A

Primary market for bonds and debentures

39
Q

characteristic of a liquid market

A

narrow price spreads in bid/ask prices
- A liquid market has the following characteristics: frequent trades; narrow price spread between bid and ask prices; and small price fluctuations from trade to trade.

40
Q

In Canada, on which types of markets do most bonds and debentures trade?

A

Dealer markets and Over-the-counter (OTC) markets.

41
Q

Who is responsible for providing liquidity on over-the-counter (OTC) markets by posting bid and ask quotations?

A

Market makers.

42
Q

How is liquidity ensured in over-the-counter (OTC) market trading?

A

Market makers quote bid and ask prices.

43
Q

An individual has two personal accounts and one account in trust at an investment dealer for a minor child. How would her coverage be evaluated by the Canadian Investor Protection Fund (CIPF)?

A

Two personal accounts are combined, while the trust account is evaluated separately.

CSC (2 decks)

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