Deck 18: The Financial Services Industry in Canada

Question 1

Money serves as a measure of value when it is used as a yardstick to measure or compare values of products,services,or resources.

Answer 1

True

Question 2

The government agency responsible for regulating the supply of money in Canada is the Bank of Canada.

Answer 2

True

Question 3

When investing in a term deposit,an investor must be aware that `the length of time the money is left on deposit and the interest rate can affect the dollar value the investor receives at the end of a specified time.

Answer 3

True

Question 4

Credit unions generally pay higher interest to depositors while providing loans at lower cost than commercial banks.

Question 5

The M1++ supply of money consists of currency,chequing accounts,and current accounts.

Question 6

The tool most frequently used by the Bank of Canada to control inflation is through interest rates.

Question 7

The major problem with automated teller machines is that they are available only during regular banking hours.

Question 8

Canada's six major banks are some of the largest banks in the world.

Question 9

Metal coins and paper bills,which generally are called currency,are the objects most commonly used for money.

Question 10

Non-banks do not accept deposits,but offer many services not provided by regular banks.

Question 11

The CDIC (Canada Deposit Insurance Corporation)insures individual bank deposits up to $500,000 per depositor.

Question 12

Banks charge the prime rate only to their high-risk customers.

Question 13

In Canada,a single body regulates the entire financial services industry.

Question 14

The CDIC insures all accounts in each member Canadian financial institution for up to $6000 per individual at one bank.

Question 15

The regulations in the financial services industry are viewed as nothing more than a nuisance by investors and policy holders.

Question 16

The M2 supply of money consists of all the components of M1 plus savings accounts and term deposits.

Question 17

Commercial banks typically are not-for-profit organizations.

Question 18

The financing service sector in the Canadian economy is widely recognized as one of the safest and healthiest in the world.

Question 19

With proper monetary policy you can keep the economy growing but also cause inflation.

Question 20

The primary function of the Bank of Canada is to maintain a healthy economy by regulating the supply of money.

Question 21

To avoid paying a commission to the investment banking firm,a corporation may sell a new security issue directly to investors.

Question 22

When Kathy completed her training she expected to be given a stockbroker's position.Instead,she is called an account administrator.This is a better descriptive term than stockbroker because she actually buys and sells all types of securities,not just stock.

Question 23

An individual who purchases 75 shares of Bell Canada has engaged in a round lot transaction.

Question 24

A high-risk investment is made in the hope of earning a fairly large profit in a short time span.

Question 25

A bear is an investor who expects prices to go down.

Question 26

For an investor,liquidity can be defined as the ease with which an investment can be converted into cash.

Question 27

Load funds generally charge commissions and no-load funds do not.

Question 28

Organizations which perform banking functions for consumers in Canada include all of the following except:

A)trust companies.
B)credit unions.
C)the Bank of Canada.
D)insurance companies.

Question 29

Canada's provinces and territories are responsible for the securities regulations within their respective borders.

Question 30

Stocks are a good way to satisfy the growth factor in personal investing.

Question 31

Most Canadians do not own bank shares.

Question 32

Bond prices generally fluctuate inversely with current market interest rates.

Question 33

A company should normally meet its long-term financial needs by first issuing corporate stock.

Question 34

Investors who buy bonds have more options for placing an order than investors buying and selling stock.

Question 35

Some Canadian banks now offer branchless banking.

Question 36

A stock split immediately increases the value of an investor's holdings.

Question 37

A prospectus is a corporation's annual report on its operations.

Question 38

John purchased a corporate bond with a face value of $1,000 and a stated interest rate of 4 percent; if interest rates go up he may be forced to sell the bond at a discount.

Question 39

A securities dealer is an organization that helps corporations sell new security issues.

Question 40

A limit order is a request that a stock be bought or sold at a price equal to or better than some specified price.

Question 41

When the Bank of Canada lowers the bank rate,money:

A)lending stops.
B)money is easier to obtain.
C)money is harder to obtain.
D)money cannot be obtained.

Question 42

Kelly will give a report in her college economics class on money as a medium of exchange.The title of her paper is "Money: It Doesn't Disintegrate When Handled or Melt in the Sun".Which of the five essential elements of money will she talk most about?

A)Divisibility
B)Portability
C)Stability
D)Durability

Question 43

Anything accepted by a society to purchase goods and services or resources is called:

A)money.
B)barter.
C)capital.
D)cash.

Question 44

When the prime rate is high:

A)there is more money for banks to lend.
B)there is an increase in the overall money supply.
C)there is increased economic activity.
D)there is an economic slowdown.

Question 45

One method the Bank of Canada uses to slow the economy is to:

A)sell government bonds to banks and other businesses.
B)raise the prime rate.
C)raise the overnight rate.
D)lower the overnight rate.

Question 46

Which of the following financial institutions may be regulated at both the federal and provincial level?

A)banks
B)credit unions
C)insurance companies
D)securities dealers

Question 47

Credit union members usually are:

A)depositors who buy membership.
B)employees of a particular company.
C)those who live in a particular community.
D)All of these answers are correct.

Question 48

During periods of high inflation,money loses which essential characteristic?

A)Divisibility
B)Portability
C)Stability
D)Durability

Question 49

The CDIC insures all accounts in each member bank for up to _________ per depositor.

A)$20,000
B)$40,000
C)$60,000
D)$100,000

Question 50

Which of the following would not be included in the M1++ definition of money?

A)coins
B)paper currency
C)term deposits
D)personal cheques

Question 51

The interest rate that the Bank of Canada charges for loans to chartered banks is called the:

A)reserve requirement.
B)overnight rate.
C)margin requirement.
D)prime rate.

Question 52

A business that collects premiums from policyholders and then often provides long-term financing for real estate development projects is a(n):

A)commercial bank.
B)credit union.
C)insurance company.
D)crown corporation.

Question 53

If the Bank of Canada wished to increase economic activity,it would be likely to:

A)sell government securities.
B)decrease the overnight rate.
C)increase the overnight rate.
D)increase the prime rate.

Question 54

The responsibility for insuring deposits against bank failures is held by:

A)the Bank of Canada.
B)the Canadian Deposit Insurance Corporation.
C)the elected officials of the Canadian government.
D)the Canadian Treasury Board.

Question 55

A financial institution that is owned by its depositors is called a(n):

A)common stock bank.
B)credit union.
C)insurance company.
D)savings and loan association.

Question 56

The regulations in the financial services sector are time consuming and costly to complete because:

A)this sector has been very slow to implement technological improvements.
B)these regulations are designed to protect investors.
C)there are numerous sets of regulations that exist,and no one is sure which set represents the rules that are currently in force.
D)the regulators are trying to justify their existence.

Question 57

The primary function of the Bank of Canada is to:

A)charter new banks.
B)regulate the supply of money in the world to support capitalism.
C)appoint its board members.
D)regulate the supply of money in Canada to help maintain a healthy economy.

Question 58

Along with stability,all of the following are characteristics of money except:

A)durability.
B)profitability.
C)divisibility.
D)portability.

Question 59

The function of the CDIC (Canada Deposit Insurance Corporation)is to:

A)provide life insurance for all Canadians.
B)insure individual deposits in banks and trust companies.
C)provide a depository for surplus cash held by chartered banks.
D)to insure safety deposit boxes.

Question 60

All of the following are functions of the Bank of Canada except to:

A)set the bank rate.
B)insure bank depositors' deposits against bank failure.
C)control and inspect Canadian currency.
D)control inflation.

Question 61

A firm that trades securities for its clients is called a(n):

A)agent.
B)investment dealer.
C)financial planner.
D)financial advisor.

Question 62

with a bank for a set period of time to earn a higher rate of interest.She does not plan to make an early withdrawal,because early withdrawals are subject to penalties.The best investment in her case is a:

A)certificate of deposit.
B)passbook savings account.
C)foreign currency deposit.
D)commercial draft.

Question 63

A network of stockbrokers who buy and sell the securities of corporations that are on a securities exchange is called:

A)a regional exchange.
B)a futures market.
C)the over-the-counter market.
D)a stock exchange.

Question 64

Companies seeking public financing must issue a:

A)Document of Ownership.
B)Statement of Ethics.
C)Prospectus.
D)Securities report.

Question 65

Buying a particular stock in units of 100 shares is buying in:

A)market orders.
B)limit orders.
C)round lots.
D)odd lots.

Question 66

Judy Martin,owner of Judy's Fashions,received a $12,000 tax refund.She deposited the money in the Toronto Dominion Bank.The terms of the agreement are that she must leave the money on deposit for three years and the bank will pay her 6 percent interest.Her account is a(n):

A)chequing account.
B)RRSP.
C)foreign currency deposit.
D)certificate of deposit.

Question 67

Buying a particular stock in units of fewer than 100 shares is buying in:

A)market orders.
B)limit orders.
C)spot orders.
D)odd lots.

Question 68

A machine that provides almost any service a human teller can provide is called a(n):

A)ATM
B)EFT
C)ACH
D)POS

Question 69

If the bank of Canada took some of the money out of the economy,which of the following may occur?

A)deflation
B)recession
C)inflation
D)falling dollar value

Question 70

Banks distribute a good portion of their income to ___________.

A)managers
B)shareholders
C)CEOs
D)customers

Question 71

The _________ market is a market in which an investor purchases financial securities (via an investment bank or other representative)with the proceeds going to the investor selling the stock,not to the corporation whose stocks are sold.

A)over-the-counter
B)primary
C)secondary
D)broker's

Question 72

Canada's largest bank in terms of total assets is:

A)RBC Financial Group.
B)CIBC.
C)Scotiabank.
D)TD Bank Financial Group.

Question 73

Like other businesses,a commercial bank's primary mission is to:

A)store money.
B)supply money.
C)give financial advice.
D)earn a profit.

Question 74

A document stating that the bank will pay the depositor a guaranteed interest rate for money left on deposit for a specified period of time is a:

A)certificate of deposit.
B)check.
C)line of credit.
D)revolving credit agreement.

Question 75

A detailed written description of a new security,the issuing corporation,and the corporation's top management is called a(n):

A)stock issue.
B)annual report.
C)investor's analysis.
D)prospectus.

Question 76

An organization whose members can meet to buy and sell securities is called:

A)a brokerage house.
B)the Ontario Securities Commission.
C)a stock exchange.
D)a commodities exchange.

Question 77

Amounts held on deposit in savings accounts are:

A)term deposits.
B)included in the M2 supply of money.
C)included in the M1 supply of money.
D)near-monies.

Question 78

In order to purchase a new sweater,Mike Evans pulled his bank card through a magnetic card reader and entered his personal identification number.He is using a(n):

A)automated teller machine.
B)automated clearinghouse.
C)bill payment by telephone.
D)point-of-sale terminal.

Question 79

Marston Manufacturing is going to sell $75 million of common stocks.In this situation,the firm will need the services of:

A)a savings and loan association.
B)a commercial bank.
C)a securities dealer.
D)the Canadian government.

Question 80

A system of exchange in which goods and services are traded directly for other goods and services is called a(n)_________ system.

A)monetary
B)barter
C)exchange
D)mercantile