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CHAPTER 15 types of investments.docx

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FIN 502
Steve Joyce

CHAPTER 15 types of investmentsCASH AND CASH EQUIVALENCESFederal government of Canada securities o Treasury bills shortterm obligations issued normally in denominations ranging from 1000 to 1 million and with 91day 182day and occasionally 1year termDoes not pay interest but purchased at a discount from their face valueDifference between the face value and the initial price paid is considered as interest income for tax purposes o Canada savings bonds CSBs sold once a year with the actual issue date and the maturity date falling on November 1Regular interest bond pays annual interest either by cheque or by direct deposit into the investors bank account each yearCompound interest bond does not pay annual interest but reinvests the interest payable automatically until maturity or redemptionDeposits with financial institutions o Bank accountsChequing accounts does not pay interestSavings account do not allow chequing but pay interest to the account holdersCheuqingsavings account attributes of the two allows chequing but pays a lower interest rate than savings accounts o Term deposits guarantee a rate of interest for a specified term o Guaranteed investment certificates GICs longterm deposits with guaranteed interest rate o Canada deposit insurance corporation CDIC provides investor with insurance against any loss on his deposits should a member institution become insolvent or bankruptMaximum coverage is 100000 for each person in each member institution amount applies to the c
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