Financial Markets and Institutions Chp 2 Flashcards
What is the Importance of Financial Markets
A market in which securities are issued and traded (stocks, bonds, commodities)
- they promote economic growth and financial stability
Primary Market vs Secondary Market
Primary market is the market for where the sale of securities first occurs
Secondary market is the purchase of existing securities aka the secondary transaction
WHat are stock markets aka equity markets
Toronto Stock Exchange (TSX) is the main stock exchange for trading shares of large Canadian corporations,
smaller companies is done through TSX Venture exchange (TSX-V)
WHat is Bond MArkets
also know as the fixed income market where securities/nbondsare traded among investors and promised a fixed amount of income
WHat is Commodities MArket
markets where physical goods are sold rather than financial assets (gas, oil, wheat)
What is a Financial Intermediary
an organization that raises money from investors and provides financing for individuals/corporations, a bank is a financial intermidiatary
What are mutual funds
an investment made by mutiple investors in a wide range portfolio of stocks,bonds, or other securities. benifits include less risk because money is spread over multiple securities
What are EFTS
efts are like mutual funds except trade throughout the day at market prices, just like stocks. benefits include lower fees, and are very liquid
WHat are pension funds
a long term investment fund that pools money from employees and employers to provide retirement income for workers .
WHat is Transporting cash across time
refers to how moneys values change over time due to interest rates, inflation and investment opportunities ( a dollar today is worth more than a dollar tomorrow due to its earning potential)
Financial Institutions
raise financing by accepting deposits or selling insurance policies and provide additional financial services.
invests in securities and loan money directly to individuals and businesses
risk transfer
shifting financial risk to another party often insurance policies like health, car, life insurance)
helps individuals and businesses avoid large financial losses
Payment Mechanisms
refers to the method and systems used to transfer money between individuals business and financial institutions (cash, checks, credit)
what is the Opportunity cost of capital
Is the minimum rate of return an investor could earn in financial markets on an investment of similar risk
