The Canadian Financial Marketplace
Define investment capital
Investment captial is available and investable wealth (eg. real estate, stocks, bonds, and money) used to enhance the economic growth prospects of the economy.
Describe the role played by suppliers and users of capital in the economy.
A direct investment; an individual or company invests directly in an item (eg. house, new plant, or new road)
Indirect investment occurs when an individual buys a security and the issuer invests the proceeds.
List 3 characteristics of Capital?
It is mobile, it is sensitive, and it is scarce
The only source of capital is? and where can it come from?
The only source of capital is savings. And capital comes from retail, institutional and foreign investors. Users of capital are individuals, businesses and governments, both canadian and foreign users
Description of debt
Debt (bonds or debendtures): the issuer promises to repay a loan at maturity, and in the interim makes payments or interest or interest and principal at designated times.
Description of Equity
Equity is stocks: the investor buys a share that represents a stake in the company.
Description of investment funds
Investment funds are mutual funds: a company or trust that manages investments for its clients.
Description of Derivatives
Derivatives are options, futures & rights; these products are derived from and underlying instrument such as a stock, other financial instrustment, commodity or index.
Describe the other remaining instruments
Other financial instruments would include linked-notes & ETFs: these relatively new products have been financially engineered and various combinations of debt, equity, and investment funds.
Describe the role and difference of different financial markets
The financial markets facilitate the transfer of capital between investors and users through the exchange of securites. These do not involve physical movement, they are simply the venue for agreeing to transfer ownership.
Define primary markets
The primary market is the inital sale of securities to an investor. mutual funds are bought and sold in the primary market.
Define the secondary market
The secondary market is the transfer of already issued securities among investors.
Whats an auction market?
In an auction market, clients bid and ask quotations for a stock are chanelled to a single central market(stock exchange) and compete against eachother.
what is a dealer market?
Dealer markets are a network of dealers that trade directly between eachother. most bonds and debentures trade on these markets.
Describe the roles of the financial intermediaries in the canadian financial services industry.
The financial intermediary is an organization that facilitates the movement of capital between suppliers and users.
financial intermediaries can be divided into two broad catergories: the deposit-taking and non-deposit taking institutions.
what are deposit-taking institutions?
Deposit-taking institutions are banks and trust companies.
what are non-deposit taking institutions
non deposit taking institutions can be life insurance companies and investment dealers, among others.