Why are registered accounts (RRSP, TFSA, RESP) considered CASH accounts:
Question 3 options:
this is false. There is no such things as registered accounts are considered as cash accounts
because you can only hold money markets &/or cash equivalents investments
because you can only contribute/deposit in cash
because you are not allowed to borrow against the securities held in the account
The reason registered accounts such as RRSPs, TFSAs, and RESPs are considered cash accounts is primarily because you can only contribute or deposit in cash. Unlike non-registered accounts, you can't fund these accounts with securities or other in-kind contributions such as stocks or bonds. Instead, you're limited to cash contributions. This distinction helps to maintain the tax advantages and eligibility for government grants associated with these registered accounts.
rior to going for an IPO, a company is considered to be ALL of the following EXCEPT:
Question 4 options:
a private company
financed by themselves, friends and family, venture capital etc...
listed on a public exchange e.g. TSX, NASDAQ
owners would like to unlock the shareholding value
Prior to going for an IPO, a company is considered to be of the following EXCEPT "listed on a public exchange e.g TSX, NASDAQ."
Before an Initial Public Offering (IPO), a company is privately held and financed by themselves, friends and family, and venture capital. Its shares are not publicly traded on exchanges like the TSX or NASDAQ. The primary goal of an IPO is to become on a public exchange, allowing the company's owners to unlock shareholding value and provide liquidity to existing shareholders.
All of the following are correct for a "cash account" and a "margin account"? EXCEPT
Question 6 options:
You can keep cash, mutual funds, bonds, options, futures in both accounts
In a cash account you have to pay your financial products full in cash, whereas in a margin account you can pay partially in cash and borrow the rest
Your profit/loss can be magnified in a margin account vs cash account
Both accounts can earn interest on credit cash balances (if the broker offers interest)
The following statement is NOT correct for both a "cash account" and a "margin account": "You can keep cash, mutual funds, bonds, options, futures in both accounts."
In a cash account, you can hold cash, mutual funds, and bonds, but options and futures trading typically require a margin account. Therefore, the ability to hold options and futures exists in a margin account but not in a cash account.
Unit 6 –Ethics in Finance talks about "Corporate Governance". The importance of "Corporate Governance" is:
Question 7 options:
Specify how decisions are made in a business organization &/or appoint/dismiss C-suite management
To punish the wrongdoers/unethical management
To protect the environment
To avoid bankruptcy
The importance of "Corporate Governance" is to specify how decisions are made in a business organization and/or appoint/dismiss C-suite management. Corporate governance establishes the framework for how a company's board of directors, senior management, and other stakeholders are held accountable for their actions and responsibilities. It aims to ensure that the organization operates in a transparent, ethical, and accountable manner to the interests of shareholders and other stakeholders.
Susan has a margin account. She logged into her online account and her margin account (REAL TIME) on July 2, 2020 showed a credit balance of $1,500. She decided to purchase 100 shares of TD Bank (TSX:TD) a blue chip company that offers 70% loan value for $30.40. The total cost of the shares is $3,040 (ignore commissions). What would show on her margin statement after the transaction? (assuming no new trades and no interest has been paid or charged)?
Question 8 options:
Under margin $588
Excess margin $1540
Under margin $1540
Excess margin $588
After Susan's purchase of 100 shares of TD Bank at a of $30.40 per share, the total cost of the shares would indeed $3,040. Since TD Bank offers a 70% loan value, Susan would be able to borrow70% of the total cost, which is $2,128 (70% of $3,040).
Given Susan started with a credit balance of $1,500, her margin statement after the transaction would show an "Under margin $588" as she would need to cover the remaining $588 to meet full cost of the purchased shares.
In one of our in-class activity "IPO Bookbuilding" who was one of the buying clients
Question 9 options:
retail clients
chartered banks
hedge funds
private corporations
In the "IPO Bookbuilding" process, one of the buying clients could be chartered banks. These banks often participate as institutional in initial public offerings, contributing to the bookbuilding process by indicating the number of shares they are willing to purchase and at what price.
The term _______________ means a corporation decides to go bankrupt because they want to avoid paying higher salaries due to unions
Question 11 options:
strategic bankruptcy
creditor bargain
credit bankruptcy
liquidation
The term "strategic bankruptcy" means a corporation decides to go bankrupt because they want to avoid paying higher salaries due to unions.
In one of our in-class activities " Market Making". The primary reason for the market makers were:
Question 12 options:
to make as much money as possible going long or short without any trading limits
to exploit the market and push away retail clients as market makers have large capital and can move the market
to dominate their assigned stock
to provide liquidity in the market for their assigned stock
In the "Market Making" activity, the primary reason for the market makers is "to provide liquidity in the market for their assigned stock." Market makers fulfill this crucial role by quoting both the buy and sell prices for a security and standing ready to buy or sell as necessary, thereby ensuring there is a liquid market for the stock.
A formal take-over bid is:
Question 13 options:
an offer to acquire 20% or more of the outstanding voting or equity securities of a target company
an offer to acquire 51% or more of the outstanding voting or equity securities of a target company
an offer to acquire 100% or more of the outstanding voting or equity securities of a target company
an offer to acquire 10% or more of the outstanding voting or equity securities of a target company
A formal take-over bid is "an offer to acquire 20% or more of the outstanding voting or equity securities of a target company." This threshold triggers the requirement for a formal takeover bid under securities regulations.
One of the failures for RISK management mentioned in the Ethics in Finance book is due to the "Herd Behaviour". Herd behaviour can simply be classified as ALL of the below EXCEPT:
Question 14 options:
animal spirit like the annual bull run in Spain
the mania of buying Bitcoin which led the price to rise to US$70K
ignore the noise of the market and stay passive and do not do anything
buying houses during COVID for the reason of FOMO (Fear of Missin
The failure for RISK management mentioned in the Ethics in Finance book is due to "Herd Behavior." Herd behavior can simply be classified as "ignore the noise of the market and stay passive and do not do anything." This type of behavior is what often leads to individuals following the actions of the larger group rather than making independent decisions based on analysis and information.
Ann has opened a NEW margin account. She logged into her online account and her margin account (REAL TIME) on Dec 1, 2021 showed a credit balance of $2,500. She decided to purchase 100 shares of BCE Inc (TSX: BCE) a blue chip company that offers 70% loan value for $70.00. The total cost of the shares is $7,000 (ignore commissions).
What can she do after the transaction is completed (ignoring commissions). She can do ALL of the following EXCEPT(assuming this is her only purchase and has no existing stock)
Question 15 options:
she can buy an extra 15 shares of BCE @$70.00 using the same margin the broker offers
she will have a deficit of $400 and she needs to either reduce her purchase to buy 95 shares or add extra $400 to buy 100 shares of BCE
she can buy the 100 shares @ $70 and keep the excess funds in her account
she will have an excess of $400 and she can withdraw the money to her bank account
After the transaction, Ann can do all of the following EXCEPT "she will have an excess of $400 and she can withdraw the money to her bank account."
Given the total cost of the shares is $7,000, with a credit balance of $2,500, Ann's account would fall short by $400 to complete the purchase of 100 shares. Hence, she would need to either reduce her purchase to buy 95 shares to cover the deficit or add an extra $400 to buy 100 shares of BCE. Therefore, she would not have an excess of $400 and be able to withdraw the money to her bank account.
One of the stocks in the market making in-class activity was:
Question 16 options:
TD Bank
Apple
Rogers Communications
Star Hub
The stock involved in the market making in-class activity was TD Bank.
A client purchases a index mutual fund from you and ask what kind of mutual fund did he/she buy and you say (based on today's world):
Question 17 options:
an open ended index mutual fund issued by the bank branch
a closed ended index mutual fund issued by the fund company
an open ended index mutual fund issued by the fund company
an open ended index mutual fund issued by the stock exchange
You would respond that the client bought "an open-ended index mutual fund issued by the fund company."
Exchange traded funds (ETF) has become a popular investing product than a no-load index mutual fund from a bank. Why is that? What is the main advantage?
Question 18 options:
ETF offers more variety
ETF costs less
ETF is more suited for younger generations
ETF can be bought and sold at any price during market hours
The main advantage of exchange-traded funds (ETFs) over no-load index mutual fund from a bank is that "ETF less." ETFs generally have lower expense ratios compared to mutual funds, making them an attractive option for cost-conscious investors. This cost advantage contributes to the growing popularity of ETFs as an investing product.
Unit 6 – Ethics in Finance, the author talks about the "Darwinian Struggle" which means:
Question 19 options:
It is your right to declare bankruptcy if things don't go your way
Bankruptcy is unethical and people/corporations should be punished
Bankruptcy are broken promises to pay debt
Competition is fierce and bankruptcy allows the "survival of the fittest"
The "Darwinian Struggle," as discussed in Unit – Ethics in Finance, refers to the concept that "competition fierce and bankruptcy allows the 'survival of the fittest'." This terminology draws a parallel the struggle for survival in nature, as described by Charles Darwin theory of natural selection, and the competitive struggle faced by businesses and individuals in financial world.
What are the drawbacks of an income trust? All of the following EXCEPT
Question 20 options:
pay out almost all of their incomes to the unitholder keeping very little for the income trust
rely on the management to ensure they are managed properly
provide consistent cash flows from businesses where investors may not have the capacity or chance to invest in
their performance are cyclical and depend on the state of the econo
The drawback of an income trust is that they "provide consistent cash flows from businesses where investors may not have the capacity or chance to invest in." This statement does not align with the drawbacks typically associated with income trusts. Instead, income trusts do rely on the management to ensure they are managed properly, pay out almost all of their incomes to the unitholder keeping very little for the income trust, and their performance is cyclical and dependent on the state of the economy.