Markets comprised of securities with maturities of one year or less are generally referred to as:
a. money markets
b. capital markets
c. stock markets
d. bond markets
a. money markets
Markets comprised of securities with maturities greater than one year are generally referred to as:
a. money markets
b. capital markets
c. stock markets
d. bond market
b. capital markets
One of the main purposes of the capital markets is:
a. to provide access to short-term funds
b. to provide access to long term funds
c. to allocate capital to the most efficient user
d. to set various interest rates
c. to allocate capital to the most efficient user
In recent years Government of Canada funding requirements have:
a. increased and become more short term
b. increased and become more long term
c. decreased and become more short term
d. decreased and become more long term
d. decreased and become more long term
With respect to corporate bonds, all of the following are true except:
a. the market for corporate bonds dwarfs the market for stock
b. the percentage of bond financing is affected by common share prices
c. interest rate levels are less significant than common share prices
d. corporate bond markets are dominated in size by the stock market
d. corporate bond markets are dominated in size by the stock market
A major disadvantage of preferred stock is:
a. common stock dividends have a higher order of precedence
b. dividends are not tax-deductible
c. there is no secondary market for preferred stock
d. the preferred dividend may vary greatly year to year
b. dividends are not tax-deductible
Which of the following constitutes an internal source of funds:
a. corporate bonds
b. common stock
c. commercial paper
d. retained earnings and amortization cash flow
d. retained earnings and amortization cash flow
The major supplier of funds for investment is:
a. the federal government
b. provincial and local governments
c. corporations and other business entities
d. households
d. households
Which of the following characteristics of financial intermediaries is incorrect:
a. they are the interface between suppliers and demanders of funds
b. they increase the cost of funds to corporation and governments
c. they help make the flow of funds efficient and competitive
d. they include banks, mutual funds, and credit unions
b. they increase the cost of funds to corporation and governments
Nonresident holdings of Canadian securities are most significant in the:
a. bond market
b. money market
c. stock market
d. mortgage market
a. bond market
Which of the following statements about securities markets is incorrect:
a. they aid in the allocation of capital
b. they provide liquidity to investors
c. securities are initially placed in the secondary market
d. the keep prices competitive among alternative security investments
c. securities are initially placed in the secondary market
Organized securities markets exhibit all of the following characteristics except:
a. listings on national and regional exchanges are mutually exclusive
b. each exchange has a central location where buying and selling occurs
c. brokers represent the actual buyers and sellers
d. securities are listed and traded with the approval of the board of governors
a. listings on national and regional exchanges are mutually exclusive
It would be fair to say that securities markets in the future:
a. will become more competitive as an international market system develops
b. will be less efficient
c. will be more highly segregated than they are today
d. will be less automated than today's markets
a. will become more competitive as an international market system develops
Markets may be said to be efficient when:
a. prices adjust rapidly to new information
b. there is a continuous market with successive trade at widely varying prices
c. the market absorbs only small dollar amounts without destabilizing prices
d. all of the above are correct
d. all of the above are correct
The strong form of the efficient market hypothesis states that:
a. past price information is unrelated to future prices
b. prices reflect all public information
c. both public and private information is reflected in security prices
d. prices reflect all private or inside information
c. both public and private information is reflected in security prices
abnormal return:
A gain or loss above what should be expected, given the degree of risk inherent in an investment.
brokers:
Members of organized stock exchanges who have the ability to buy and sell securities on the floor of their respective exchanges. Brokers act as agents between buyers and sellers.
capital markets:
Competitive markets for equity securities or debt securities with maturities of more than one year. The best examples of capital market securities are common stock, bonds, and preferred stock.
Computer Assisted Trading System (CATS):
Buy or sell orders for securities can be executed electronically on the TSE, without the use of floor traders.
dealers:
Participants in the market who transact security trades over the counter from their own inventory of stocks and bonds. They are often referred to as market makers, since they stand ready to buy and sell their securities at quoted prices.
discount brokers:
Buyers and sellers of securities that provide no research to clients; therefore, commissions are generally less expensive than through a full-service broker.
efficient market hypothesis:
Hypothesis that suggests that markets adjust very quickly to new information and that it is very difficult for investors to select portfolios of securities that outperform the market. The efficient market hypothesis may be stated in many different forms.
externally generated corporate funds:
Corporate financing raised through sources outside of the firm. Bonds, common stock, and preferred stock fall in this category.
financial intermediary:
A financial institution, such as a bank or a life insurance company, that directs other people's money into such investments as government and corporate securities.
four pillars of finance:
Traditional separation of financial institution roles in Canada among chartered banks, trusts, insurance companies, and securities dealers.
internally generated funds:
Funds generated through the operations of the firm. The principal sources are retained earnings and cash flow added back from depreciation and other noncash deductions.
Investment Dealers Association:
The self-regulatory organization of the Canadian securities industry.
money markets:
Competitive markets for securities with maturities of one year or less. The best examples of money market instruments would be Treasury bills, commercial paper, and bankers' acceptances.
Ontario Securities Commission (OSC):
The regulatory body that oversees securities-related activities in Ontario. The OSC sets the standards for other provincial commissions because the majority of dollar volume of securities trading occurs in Toronto.
over-the-counter markets:
Markets for securities (both bonds and stock) in which market makers, or dealers, transact purchases and sales of securities by trading from their own inventory of securities.
secondary trading:
The buying and selling of publicly owned securities in secondary markets, such as the Toronto Stock Exchange and the over-the-counter markets.
securities:
Evidence of financial obligation.
three-sector economy:
Households, business, and government are the three sectors in the Canadian economy.
Toronto Stock Exchange (TSE):
The largest organized security exchange in Canada.
