









Study with the several resources on Docsity
Earn points by helping other students or get them with a premium plan
Prepare for your exams
Study with the several resources on Docsity
Earn points to download
Earn points by helping other students or get them with a premium plan
Community
Ask the community for help and clear up your study doubts
Discover the best universities in your country according to Docsity users
Free resources
Download our free guides on studying techniques, anxiety management strategies, and thesis advice from Docsity tutors
The latest version of the afm 121 midterm exam for investment and securities, including all questions and correct answers. Topics covered include different types of investment dealers, departments within an investment dealer, leverage, eurobonds or eurocurrencies, investment dealer roles in primary and secondary markets, types of banks, etfs, closed-end funds, open-ended funds, osfi, canadian deposit insurance corporation, securities regulations, financial instruments, primary and secondary markets, and regulations for financial intermediaries.
Typology: Exams
1 / 15
This page cannot be seen from the preview
Don't miss anything!
What is CSI? ------CORRECT ANSWER---------------Canadian Securities Institute Offers courses required for licensing by regulators Different types of investment dealers? ------CORRECT ANSWER--------------
What is leverage? ------CORRECT ANSWER---------------Short term borrowing finances long term investments Are there any risks with borrowing short and lending long? ------CORRECT ANSWER---------------People can default Short term rates can be high and long term rates can be low What is Eurobonds or eurocurrencies? ------CORRECT ANSWER------------- --Euro denotes a security trading outside of its home jurisdiction (US dollar circulating outside USA) How do investment dealers act as principals in the primary markets? ------ CORRECT ANSWER---------------Investment dealer agrees to a price with the issuer and buys all of the shares / bonds (bought deal) Then dealer sell shares or bonds to investors How do investment dealers act as agents in the primary market? ------ CORRECT ANSWER---------------Investment dealer markets the shares or bonds to investors on a best efforts basis; the investment dealer does not purchase Charge commission How do investment dealers act as principals in the secondary markets? ---- --CORRECT ANSWER---------------Invest their own capital and earna spread between purchase and sale prices
What is OSFI? ------CORRECT ANSWER---------------The Office of the Superintendent of Financial Institutions Regulates and supervises banks, insurance, trust and loan companies, and pension plans What is CDIC? ------CORRECT ANSWER---------------Canadian Deposit Insurance Corporation Insures deposits up to 100k per bank account Does each province have its own securities commission? ------CORRECT ANSWER---------------Yes What is CSA ------CORRECT ANSWER---------------Canadian Securities Association Formed by all 13 securities commissions to provide a national umbrella group to co-ordinate provincial activities What is the vital function of financial markets? ------CORRECT ANSWER--- ------------Help facilitate transfer of capital What are the three components of the wealth transfer process? ------ CORRECT ANSWER---------------Financial instruments (what is actually bought / sold)
Financial markets (facilitating / buying financial instruments) Financial intermediaries (people / companies involved in financial instruments and markets) What is capital made up of? ------CORRECT ANSWER---------------Capital is made up of governments, corporations and individuals How is capital transferred? ------CORRECT ANSWER---------------Direct investment (land, real estate) Indirect investment (stocks, bonds, t-bills) When will people transfer capital? ------CORRECT ANSWER--------------- When it is easy, cheap, and generates a good return What does capital flow depend on? ------CORRECT ANSWER--------------- Political environment Economic trends Fiscal and Monetary policy Investment opportunities Labour force (highly educated / laws governing rights of labour force) Who provides capital? ------CORRECT ANSWER---------------Retail investors (individuals that buy retail) Institutional Investors (pension funds and mutual funds) Foreign investors (can include foreign retail, institutional and government investors)
How are regulations set for financial intermediaries? ------CORRECT ANSWER---------------Regulations are meant to be structured such that market efficiency is a by-product of this self interest What are auction markets? ------CORRECT ANSWER---------------Where all transaction converge in one location (TSX, TSX Venture Exchange) How does a stock exchange make money? ------CORRECT ANSWER------- --------Transaction fees Initial listing fees What is the latest trend in stock exchanges? ------CORRECT ANSWER----- ----------Physical locations to trading systems Speed and cost efficiency are crucial What are dealer markets? ------CORRECT ANSWER---------------Over the counter markets Trade directly with one another over the phone Mostly used for bonds What are ATS? ------CORRECT ANSWER---------------Computerized systems that execute orders outside traditional exchanges Buyers / sellers often contract each other directly Costs / fees are lower
Is securities regulations a provincial responsibility? ------CORRECT ANSWER---------------Yes What are SROs and what do they do? ------CORRECT ANSWER--------------
Three basic methods are used to protect investors? ------CORRECT ANSWER---------------Registration of securities dealer and advisors Disclosure of material facts Enforcement of the laws and policies How to become an IA? ------CORRECT ANSWER---------------Must pass CSC and CPH Complete a 90 day training course Be subject to supervision for 6 months Complete the CSI's course within 30 months of becoming an IA What is fiduciary obligation? ------CORRECT ANSWER---------------They must operate in the best interest of their clients and not their own Member firms and IA's must: ------CORRECT ANSWER---------------Not reveal confident info Avoid conflict of interests Ensure that all representations to clients are made honestly and in good faith Follow client instruction
What are the 3 areas of market regulation? ------CORRECT ANSWER------- --------Market surveillance (tracking whether there is insider trading) Investigation enforcement and regulatory / market policy Where all transactions converge in one location What is a takeover bid? ------CORRECT ANSWER---------------If an acquiring firm acquires greater than 20% of voting securities of another company, it is defined as a 'takeover bid' and must abide with takeover bid legislation At what percentage must a press release or early warning report be released? ------CORRECT ANSWER---------------10% What are the insiders defined as? ------CORRECT ANSWER--------------- Directors or senior officers (CEO or CFO) A person or company controlling more than 10% of voting securities A reporting issuer that has acquired any of its own securities (buying back its own shares) insiders are required to file reports reporting their trading activity in the company for which they are an insider What do fixed income securities include? ------CORRECT ANSWER---------- -----Bond Debentures Mortgages Swaps Preferred Shares
1 / 3
2 / 3 Today, you invested $100 in a GIC that pays an EAR of 3%. What is the value of investment in 14 years?