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BU111 (655)
Lecture 6

Week 6 BU111.docx

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Sofy Carayannopoulos

BU111 Chapter 5-Economic Factors – Investments and Exchange Week 6 Balance of Trade-the economic value of all the products that a country exports minus the economic value of all the products it imports Surplus-situation in which a country exports more than it imports, creating a favourable balance of trade Deficit-situation in which a country’s imports exceed its exports, creating a negative balance of trade Balance of Payments-flow of all money into or out of a country Exchange Rate-rate at which the currency of one nation can be exchanged for the currency of another nation Euro-a common currency shared among most of the members of the EU (excluding Denmark, Sweden, and the UK) Chartered Bank-a privately owned, profit-seeking firm that serves individuals, non-business organizations, and businesses as a financial intermediary Trust Services-the management of funds left in the bank’s trust Letter of Credit-a promise by a bank to pay money to a business firm is certain conditions are met Banker’s Acceptance-a promise that a bank will pay a specified amount of money at a future date Electronic Funds Transfer (EFT)-a combination of computer and communications technology that transfers funds or information into, from, within, and among financial institutions Automated Banking Machines (ABM)-electronic machine that allows bank customers to conduct account-related activities 24/7. Debit Card-a type of plastic money that immediately on use reduces the balance in the user’s bank account and transfers it to the store’s account Smart Cards-a credit card-sized computer that can be programmed with “electronic money” E-Cash-money that moves among consumers and businesses via digital electronic transmissions Prime Rate of Interest-the lowest rate charged to borrowers Reserve Requirement-the requirement (until 1991) that banks keep a portion of their chequable deposits in vault cash or as deposits with the Bank of Canada Bank of Canada-Canada’s central bank; formed in 1935 Bank Rate (Rediscount Rate)-The rate at which chartered banks can borrow from the Bank of Canada BU111 Chapter 5-Economic Factors – Investments and Exchange Week 6 Trust Company-safeguards funds and estates entrusted to it; may also serve as trustee, transfer agent, and register for corporations Credit Unions-Co-operative savings and lending association formed by a group with common interests Life Insurance Company-A mutual or stock company that shares risk with its policyholders for payment of premiums Factoring Company (or factor) –Buys accounts receivable from a firm for less than their face value and then collects the face value of the receivables Sales Finance Company-specializes in financing instalment purchases made by individuals or firms Consumer Finance Company-makes personal loans to consumers Venture Capital Firm-Provides funds for new or expanding firms thought to have significant potential Pension Fund-accumulates money that will be paid out to plan subscribers in the future Law of One Price-the principle that identical products should sell for the same price in all countries World Bank-a United Nations agency that provides a limited scope of financial services, such as funding national improvements in undeveloped countries International Monetary Fund (IMF)-United Nations agency consisting of about 186 nations that have combined resources to promote stable exchange rates, provide temporary short-term loans, and serve other purposes Securities-Stocks, bonds, and mutual funds representing secured, or asset-based, claims by investors against issuers Primary Securities Market-Market in which new stocks and bonds are bought and sold Investment Bankers-financial specialists in issuing new securities Secondary Securities Market-the sale and purchase of previously issued stocks and bonds Par Value-the arbitrary value of a stock set by the issuing company’s board of directors and stated on stock certificates; used by accountants but of little significance to investors Market Value-the current price of one share of a stock in the secondary securities market; the real value of a stock Market Capitalization-the dollar value of stocks listed on a stock exchange BU111 Chapter 5-Economic Factors – Investments and Exchange Week 6 Book Value-value of a common stock expressed as total stockholders’ equity divided by the number of shares of stock Stock Exchange-a voluntary organization of individuals formed to provide an institutional setting where members
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