RSM230H1 Study Guide - Final Guide: Leaseback, Yield Curve, Municipal Bond
Document Summary
Financial markets drive economic growth by transforming savings into investments. The three components of wealth transfer are: financial instruments, financial markets, and financial intermediaries. Capital can be used through: direct investment (land, buildings, human capital) Indirect investment (financial assets like stocks and bonds, wealth-generating assets) It comes from retail and institutional investors and goes towards corporations and government. Foreign investments play a large role, and there are two main kinds of bonds: foreign bonds and eurobonds denominated in some currency and sold in other countries. One security cannot maximize two or more of these objectives, so they are mutually exclusive. If you want to maximize safety, you must sacrifice income or growth. Short-term bonds to preferred to common stocks range from safest to most risky, and from steady income with limited growth to variable income with highest growth. For governments, a lower yield signals a steadier economy. They offer t-bills, marketable bonds, and canada savings bonds.
