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Leanne Hagarty

Business 111 Final Exam Review Guide Exam Date Friday August 2 2013 Exam Time 700pm900pm Writing Location Theatre AuditoriumExam Format 25 Multiple Choice questions1 mark each 7 Short Answer questions 2 to 6 marks each205 marks 8 Quantitative problems 2 to 55 marks each425 marks 88 marks total Economic FactorsFour Pillars of The Canadian Financial System Description and rolesfunctionsThe main function of the financial institution is to facilitate the flow of money from sectors with surpluses to those with deficits This is done by attracting funds into savings and chequing accounts The four financial pillars has been distinctly divided for quite some time until 1980 where changes were made to the Bank Act that made its pillars crumble The four pillars are Chartered banks o Privately owned profitseeking financial intermediary that services individuals businesses and nonbusiness organizations o Largest and most important financial institution in Canada because they offer many services to their customers such as pension services credit cards investment and insurance services o Main source for short term loans o Five of the largest banks in Canada account for 90 of the total bank assetsCIBC Scotiabank TD Canada Trust RBC and BMO o The Bank Act limits foreigncontrolled banks to deposits that dont exceed eight percent of the total domestic assets of all the banks in Canada o Expand money supply in Canada through deposit expansionAlternate banks o A trust company that safeguards funds and estates entrusted to itMay also serve as a trustee transfer agent and registrar for corporations and provide other services o Credit unions and caisses populaires are cooperative savings and lending associations formed by a group with common interestsLend money to consumers and businessesSpecialized Intermediaries o A life insurance company shares risk with its policyholders in return for payment of a premium by policyholdersNext largest financial intermediary o Factoring companies buy accounts receivables from firms for less than their face balue and then collect the face value of the account receivablesIf the company doesnt pay they dont get the money so they take on the risk o A sales finance company specializes in financing instalment purchases made while a consumer finance company makes personal loans to the consumer o Venture capital firms provide funds for new or expanding firms who may have potentialo Pension funds accumulate money that will be paid out to the plan subscribers in the future such as a Registered Retirement Savings Plan with the government Investment Dealers o Investment dealers are the primary distributors of new stock and bonds o They also facilitate secondary trading of stock and bonds both on stock exchanges and overthecounter stock and bond marketsChanges in Banking Industry There are three main changes that have taken place in the banking industry1 Deregulationallowed banks to alter their historical roles a Canadas banks are diversifying to provide more financial products to their clients 2 Changes in consumer demandsconsumers are no longer content to keep their money in a bank if they could get more elsewhere a Electronic banks like ING Direct and Presidents Choice pay higher interest rates on savings accounts i Traditional banks are responding to this by selling an array of services 1 BMO offers bereavement servicesif a customers mother dies they will take care of everything from funeral planning to redirecting the persons mail 3 Competition from foreign marketsincreased competition because foreign banks are now allowed to do business in Canada a Canadian banks are responding with a variety of tactics including attempts of mergers but declined by federal government due to reduced competition i Although banks cooperate in spreading fixed costs by having joint ventures 1 Example Syncor Services is a joint venture in three of the big sixBank of Canada Description tools for affecting money supply The bank of Canada was formed in 1935It is Canadas central bank and its role in managing the Canadian economy in regulating the chartered bank operationsManaged by a board of governors composed of a governor a deputy governor and twelve directors appointed from different regionsBank rate or Rediscount rateThe rate at which chartered banks can borrow money from the Bank of Canadao Basis for chartered banks prime interest ratePlay an important role in managing the money supply o To increase money supplyBuy government securitiesPeople who sell the bonds have more money in their chequing accounts and banks have more reserves to make loansLower the interest rateCheaper to borrow money more loans are taken o To decrease the money supplySell government securitiesMoney spent on bonds less money in banks brings down banks reserves less willing to give loansRaise the bank rateDecreased demand for loans Bonds Characteristics return term priority over stockholders types features factors affecting price relationship between prevailing interest rates and bond prices and reading bond quotations
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