© 2006 pearson education canada inc.chapter 14 - 1 chapter 14 understandin g banking and securities

© 2006 Pearson Education Canada Inc. Chapter 14 - 1

Chapter 14Chapter 14 Understanding

Banking and Securities


Characteristics of Characteristics of MoneyMoney

DurableDurable

PortablePortable

MediumMediumof Exchangeof Exchange

MediumMediumof Exchangeof Exchange

Measure Measure of Valueof Value

Measure Measure of Valueof Value

Store Store of Valueof Value

Store Store of Valueof Value

StableStable

DivisibleDivisible


Forms of MoneyForms of Money

Currency

Demand Deposits

Time Deposits


Substitutes for Substitutes for Currency and ChecksCurrency and Checks

Credit CardsCredit Cards

Debit CardsDebit Cards

Smart CardsSmart Cards


Financial Financial InstitutionsInstitutions

DepositDeposit

Chartered Banks

Trust Companies

Credit unions &

Caisses Populaires

NondepositNondeposit

Insurance companies

Pension funds

Finance companies

Brokerage firms


Types of LoansTypes of Loans

ConsumersConsumers

Mortgage

Automobile

Home-improvement

Student loan

BusinessesBusinesses

Expansion

New equipment

Construction

Line of credit


Electronic BankingElectronic Banking

AutomatedAutomatedTellerTeller

ElectronicElectronicFunds TransferFunds Transfer

OnlineOnlineBankingBanking


Bank Safety and Bank Safety and RegulationRegulation

•Canadian Deposit Insurance

Corporation (CDIC)

•Bank Act

•Bank Of Canada


SecuritiesSecuritiesInvestmentsInvestments

StocksStocksStocksStocks BondsBondsBondsBondsMutualMutualFundsFundsMutualMutualFundsFunds


Stocks: Important Stocks: Important TermsTerms

Authorized stock

Issued stock

Unissued stock

Stock split

Par value


LiquidityLiquidity

DividendsDividendsVoting RightsVoting Rights

LimitedLimitedLiabilityLiability

CommonCommonStockStock


Preferred StockPreferred Stock

ConvertibleConvertiblePreferred StockPreferred Stock

ConvertibleConvertiblePreferred StockPreferred Stock

CumulativeCumulativePreferred StockPreferred Stock

CumulativeCumulativePreferred StockPreferred Stock


SecuredSecuredBondsBonds

SecuredSecuredBondsBonds

DebenturesDebenturesDebenturesDebentures

ConvertibleConvertibleBondsBonds

ConvertibleConvertibleBondsBonds

CorporateCorporateBondsBonds


Corporate Bond RatingsCorporate Bond RatingsInterpretation Moody’sS&P Interpretation

Highest rating AaaAAA Prime quality

Very strong capacity to pay AaAA High grade

Highest rating AaaAAA Prime quality

Strong capacity to pay; somewhat susceptible to

changing business conditionsAA Upper-medium grade

Very strong capacity to pay AaAA High grade

More susceptible than A rated bonds

BaaBBB Medium grade

Strong capacity to pay; somewhat susceptible to

changing business conditionsAA Upper-medium grade

Somewhat speculative BaBB Somewhat speculative

More susceptible than A rated bonds

BaaBBB Medium grade

Speculative BB Speculative

Somewhat speculative BaBB Somewhat speculative

Vulnerable to nonpayment CaaCCC Poor standing;may be in default

Speculative BB Speculative

Highly vulnerable to nonpayment

CaCC Highly speculative; often in default

Vulnerable to non-payment CaaCCC Poor standing; may be in default

Bankruptcy petition filed or similar action taken

CCLowest rated; extremely poor chance of ever attaining real investment standing

Highly vulnerable to non-payment

CaCC Highly speculative; often in default


Canadian Government Canadian Government Securities BondsSecurities Bonds

Canadian Savings BondsCanadian Savings Bonds

Treasury BillsTreasury Bills

Provincial BondsProvincial Bonds

Municipal BondsMunicipal Bonds


Mutual Funds: Important Terms

Load FundLoad FundLoad FundLoad Fund No-Load FundNo-Load FundNo-Load FundNo-Load Fund

Open-End Open-End FundFund

Open-End Open-End FundFund

Closed-EndClosed-EndFundFund

Closed-EndClosed-EndFundFund


Types of Mutual FundsTypes of Mutual Funds

Money market Growth Balanced Income Global International Index


Securities MarketSecurities Market

SecondarySecondarySecondarySecondary

SecuritiesSecuritiesExchangesExchangesSecuritiesSecuritiesExchangesExchanges

PrimaryPrimaryPrimaryPrimary

PublicPublicOfferingsOfferingsPublicPublic

OfferingsOfferings


Securities Securities ExchangesExchanges

Over-The-CounterOver-The-CounterMarketMarket

National AssociationNational Associationof Securities Dealersof Securities Dealers

(NASDAQ)(NASDAQ)

Trading FloorTrading Floor

New York StockNew York StockExchange Exchange

(NYSE)(NYSE)


Buying and Selling Buying and Selling SecuritiesSecurities

Exchange FloorExchange FloorExchange FloorExchange Floor

AuctionAuctionExchange (NYSE)Exchange (NYSE)

DealerDealerExchange (NASDAQ)Exchange (NASDAQ)

ElectronicElectronicCommunicationCommunicationNetworks (ECNs)Networks (ECNs)

Stock SpecialistStock SpecialistStock SpecialistStock Specialist

ComputerComputerComputerComputer

Market MakerMarket MakerMarket MakerMarket Maker

ComputerComputerComputerComputer

BrokerBrokerBrokerBroker


Orders to Buy and Sell Orders to Buy and Sell SecuritiesSecurities

Market OrderMarket Order

Limit OrderLimit Order

Day OrderDay Order

Margin TradingMargin Trading

Stop OrderStop Order

Open OrderOpen Order

Discretionary OrderDiscretionary Order

Short SellingShort Selling


Rising Stock Rising Stock MarketMarket

Falling Stock Falling Stock MarketMarket

Analyzing Financial Analyzing Financial NewsNews


Watching Market Watching Market Indexes and AveragesIndexes and Averages

• Dow Jones Industrial Average (DJIA)

• S&P/TSX Composite Index

• NASDAQ Composite Index

• Nikkei 225 Index

• FTSE-100 Index


Interpreting Interpreting Financial NewsFinancial News

Stock Exchange Reports

Bond QuotationTables

Mutual FundQuotations


Industry ChallengesIndustry Challenges

Electronic TradingElectronic Trading

Round-the-Clock Round-the-Clock TradingTrading

Online TradingOnline Trading


Regulation of Regulation of the Securities Marketthe Securities Market

Filing Filing RequirementsRequirements

Fair DisclosureFair DisclosureRegulationsRegulations

Securities FraudSecurities Fraud

© 2006 pearson education canada inc.chapter 14 - 1 chapter 14 understandin g banking and securities

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