Business - Chapter 15
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- Any object generally accepted by people as payment for goods and services.
- - Portable
- - Divisible
- - Durable
- - Stable
- Medium of exchange
- Store of value
- Unit of Account
- Buyers and sellers must agree on the value of money.
- The value of money depends on its supply.
- As supply goes up, value goes down
- As supply goes down, value goes up
Only the most liquid forms of money (currency and demand deposit (money in chequing account))
M1 + Saving deposits, time deposit, money market mutual funds
A deposit that requires prior notice to make a withdrawal: cannot be transfer to others by cheque.
Money Market Mutual Funds
Funds operated by investment companies that bring together pools of assets from many investors to buy short-term, low-risk financial securities.
A privately owned, profit-seeking firm that serves individuals, non-business organizations and businesses as a financial intermediary.
The management of funds left in the bank's trust
Eletronic Funds Transfer
A combination of computer and communications technology that transfers funds or information into, from, within, and among financial institutions.
Automated Banking Machines
Eletronic machine that allows bank customers to conduct account-related activities.
A credit card-sized computer that can be programmed with "eletronic $"
Money that moves along customers and businesses via digital eletronic transmission.
Major source of short term financing
Prime rate of interest
- The lowest rate charged to borrowers.
- Bank rate + 2%
Bank of Canada
What they do?
- Formed in 1935. Governor is Mark Carney.
- - Sets bank rate
- - Sets monetary policy of Canada
How does the BOC control money supply?
Safeguards funds and estates entrusted to it
Co-operative savings and lending association formed by a group with common interest.
Life insurance Companies
A mutual or stock company that shares risk with its policyholders for payment of premium.
Buys a/r from a firm from less than their face value
Sales Finance Company
Specialized in financing instalment purchases made by individuals or firms.
Consumer Finance Company
Makes personal loans to consumers
Venture Capital Firm
Provides funds for new and expanding firms thought to have significant potential
Law of one price
The principle that identical products should sell for the same price in all countries.
Canada is exporting more products than it is importing...
A trade surplus occurs
Canada is importing more products than it's exporting...
A trade deficit occurs
International Payment Process
- 1: Local banks convert the $ to the currency required by trade associates.
- 2: Local bank sends payment in foreign currency, to the foreign trade partner.
- 3: The foreign trade partner deposits the payment in his or her own foreign-based bank.
Credit Union vs Bank
- Bank is a corporation
- f you are a member of a credit union, you are part owner, can participate in policies/directions
Stock and bonds (which represent a secured-asset-based claim) and mutual funds that can be bought and sold.
Par Value (stocks)
an arbitrary value set by the issuing company's board of directors
current price of a share.
market value of a firm's stock listed on a stock exchange
Shareholders' equity divided by the number of shares of common stock standing.
Issued with a stated par value - They are paid first. No voting rights - some are callable
Organization of individuals formed to provide an institutional setting in which stocks can be bought and sold.
Primary Security Market
Market in which new stocks and bonds are bought and sold.
Secondary Securities market
The sale and purchase of previously issued stocks and bonds.
individuals licensed to buy and sell securities for customers in the secondary market.
Full- Service Brokeage
Self-service, no advice offered.
Over the Counter (OTC)
Many securities not listed on stock exchange
A written promise that the borrower will pay the lender, at a states future date. Principal + stated rate of interest.
What affects bond price?
interest rate + risk of company
Bond - Format
Face Value - int % - Maturity Term - Yield % - MKT price
bonds issued by borrowers who pledge assets as collateral.
Any bond that offer bondholders the option of accepting common stock instead of cash in repayment
Any company that pools the resouces of many investors and uses those funds to purchase various types of financial securitites. - Diversification
No sales commission charged
Sales commission is charged when buy into or sell out the fund.
Mutual funds that stress socially responsible investing
Private pools of money that try to give investors a positive return regardless of stock market performance.
- Future Contracts (agreements to purchase a specified amount of commodity at a given price on a set date in the future)
- food shortage drive commodity prices up
- quite risky
The percentage of the total sales price a buyer must put up to place an order for stock or a futures contract.
Stock option - Call Option - Put Option
- The purchased right to buy or sell a stock
- the purchased right to buy a particular stock at a certain price until a specified date
- The purchases right to sell a particular stock at a certain price until a specified date.
A measure of the market value of stocks
A period of rising stock prices
A period of falling stock prices
Don Jones Industrial Average
Market Index based on the prices of 30 of the largest firms listed on NYSE
The investor makes a down payment in a portion of the price with the rest financed by the broker
An investor "borrows" shares from the broker and sells them
Laws regulating how corporations must back up securities
A detailed registration statement about a new stock
Market order - limit order - stop order - round lot - odd lot
an oder to a broker to buy or sell a certain security - only if its price is less than or equal to a given limit - if its price falls to a certain level or below - units of 100 shares - different than 100 shares
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