KYC rule: must use due diligence to learn the essential facts relevant to every client and every order; Recommendations: * Financial goals and objectives, financial circumstances, personal circumstances, investment knowledge, ability to tolerate risk and Time Horizon
Sales Representative: Help the client obtain mutual fund based on KYC information, suggest alternatives, only discuss mutual funds, Incomplete KYC –refuse the order.
Close ended fund: is a publicly traded investment company that raises a fixed amount of capital through an initial public offering.
Open ended Fund: that does not have restriction on the amount of share the fund will issue.
Volatility: statistical measure of the dispersion of return for give security or market index can be measured by St Deviation. Chapter 2: intermediaries: The deposit taking: banks, trust companies, non-deposit taking institution: life insurance companies or mutual funds.
Canadian Financial markets: Money market: t bills, bonds --- Long term capital: Fixed 2 years +, --- derivative market: balanced money market and foreign exchange market: equity.
The financial Instruments: Debt instrument: a loan made to a government corporation: bonds , t bills Equity instrument : ownership stake in a company - common and preferred shareholders are the owners
Investment funds: pension funds, mutual.
New stock issue: initial public offering: under writing, distribution, primary market, secondary
Self-Regulatory Organization (SRO’S) :Enforce and set rules for distribution of mutual funds-- MFDA: self-regulatory organization MF, IIROC : regulate the investment industry.
Primary Market: where newly issued securities (SHARES) are offered to the public example shares is
Secondary Market: that exists for an issue after large blocks of shares have been publicly distributed also called after market, for example STOCK EXCHANGE
Chapter3 : Macroeconomics : Study of overall aspects and working of a national economy such as a measurement of national income, business cycle. Inflation, unemployment, monetary or fiscal policy
Business Cycle: a cycle or series of cycles of economic expansion and contraction.
Inflation: general increase in prices and falls in the purchasing value of money.
Real GDP: macroeconomics measure of the value of economic output adjusted for prices changes.
Nominal GDP: market value (money – value) of all final goods and services produced in a geographical region, usually a country.
Productivity: quality of being productive or having the power to produce, ratio of output to inputs in production.
Calculating Gross Domestic Product: GDP = C + I + G + X-M – 5 Components * Consumption measures by a country on household goods and services * Investment measures by business on capital new equipment * Government spending’s * Exports are the goods and services purchased by foreigners * M imports are the goods and series we purchase from foreigners.
Business cycle: diagram Recession: economic activity decrease, unemployment’s rises, GDP shrinks
Through: inflation falls, interest rates ball, bonds rally, consumers begin to spend, stock prices rally.
Leading indicator: housing starts, SSP/TAX composite index, money supply, the use index of leading economic indicators, and furniture and appliance sales.
Inflation: CPI is on the most widely used indicators of inflation and is considered a measure of the cost of living in Canada: CPI 2 – CP1 / CPI = % change.
Unemployment components: * Structural unemployment: results from changes in the economy collapse * Cyclical unemployment : is tied directly to fluctuation in the business cycle * Frictional unemployment: is the result of the labor turnover in a