Suppliers of funds
Households across Canada
Demanders of funds
business and government
Commercial banks, trust companies, credit unions, life insurance companies and pension funds
Chartered Banks, Trust Companies, Credit Unions/Caisses Populaires
accept deposits, makes loans to business and consumers (Royal Bank, TD, CIBC)
administers estates, trusts, and pension plans (Canada Trust)
Credit unions and Caisses Populaires
Insurance Companies, Pension Funds, Brokerage Firms, Finance Companies
customers pay premiums on policies (Manulife, Sun Life, Great West)
employees and employers pay into pension plans to be used for retirement benefits (Ontario Teachers Pension Plan, 9.6% return since 1990)
buy and sell securities on behalf of their clients (ScotiaMcLeod, TD Waterhouse)
Insuring Bank Deposits - Canadian Deposit Insurance Corporation
is a crown corporation providing insurance for the deposits of Canadians up to $100,000
International Banking & Insurance
Many of the Canadian banks and insurance companies have large international operations (e.g. BNS in the Caribbean)
issued by corporations or governments that represent either equity or debt
ownership of the company and a fixed dividend
Value of Shares
rised and falls with the fortunes of the company and market conditions (economy)
ownership of the company, voting at the annual general meeting, electing the Board of Directors
debt obligations of corporations and governments; Regular interest payments and the repayment of principal at maturity
secured (mortgage) or unsecured (debentures), convertible (into shares)
federal, provincial, municipal
What is the highest rating (lowest risk of default)
pool investors' funds (e.g. all the banks)
Mutual Funds 2 Types of Coverage
General coverage of the market (Canada, US, Global, Europe) or specialized (growth, value, gold, high tech, healthcare)
Advantage of Mutual Funds
someone selects stocks, bonds, and other assets for you
Disadvantage of Mutual Funds
Management expense ratio (MER)
What generally outperforms mutual funds?
Exchange Traded Funds
obligations to buy or sell commodities or currencies at a specific price at some point in the future
contracts to buy or sell stocks or other financial instruments at a specific price at some point in the future
professionals who manage other people's money
Certified Financial Analyst
help companies raise funds by buying securities and then selling them to the public (underwriting)
account executives; trades securities for clients
2 Types of Market
Primary & Secondary
new securities are sold (IPO)
organized stock exchanges; foreign exchanges; over-the-counter market
New York Stock Exchange (NYSE), Tokyo Stock Exchange, Shanghai Stock Exchange
organized stock exchanges
Toronto Stock Exchange (TSX); TSX Venture Exchange
describes conditions of rising stock or bond prices (optimism)
describes conditions of falling stock or bond prices (pessimism)
What are markets driven by?
fear and greed
What is a strong predictor of both overall market performance and specific company performance?
Trends in Finance
Finance goes global; Risk management (credit risk, market risk, operational risk)
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