Eduardo F Magalhães Pimenta
5209846
ECON 331/2 Sec AA

Optional Assignment #1



2)
i) Corporate Bonds are a type of bonds with strong credit rating which typically pays an interest to the owner twice a year. The drawback of holding into corporate bonds  is the low liquidity in comparison to other securities. There is a special type of corporate bond called the convertible bonds, and they come with a bonus feature that allows the owned to convert them into a specified number of shares of stock. This feature is of course only availiable up to the time the bond reach its maturity date.

ii) Canada Savings Bonds are issued only once a year usually during the 4 weeks prior to the 4th of Novemeber. These bonds are non-marketable and offered to specific individuals, and firms. The interest rate in those bonds fluctuate, and threfore they do not increase or decrease in value.They are issued as registered bonds and can be bought in denominations ranging from 100$ to 10,000$, from financial institutions or pay roll saving plans.

iii) Stock is an equity claim on a corporation net income and assets. Though individual ownership does not give them any rights to use the corporation facility, materials or other materials. Like most equities, they make periodic payments to their holders. The advantage of holding an stock is that it does not have a maturity date. On the down side the equity holder is a residual claimant, meaning that the company shall pay all its debts holders before the equity holders.

iv) Consumer and Bank Commercial loans are as the name state loans made by banks -and financial institutions in the consumer case- to consumers and businesses. They are chracterized as being the least liquid form of capital market instrument because there are almost no secondary markets in these loands.

3) The prediction of the world moving towards a cashless society has been around for a while. Previous estimates of the time it would take for us to fully convert into one has proven to be inaccurate. There are certain obstacles in our transfrmation route, like the cost of computerizing all businesses, and therefore it is very hard to make a claim with certainty that we are moving towards a certain new custom. We could certainly say that eletronic means of payment are an increasing trend, but conventional money's life is not yet at steak. 
Beside the cost of moving to cashless society there are some other disavantages to it. Though it might be harder to steal e-money than conventional money, a succesful attempt to infiltrate money datas can be much more serious. Imagine if someone gained access to bank information databases, and could mess with them, transfering money from account to another; The type of security to prevent those issues most be highly compentent and well specialized. Another concern with electronic means of payment is that they leave a trail contraining personal datas. These personal data of buying habits, could in turn be used by markets, or other institutions thereby invading our privacy.
There are many advantages on having a cashless society. It is more convenient in certain aspects than conventional money. For example, an individual could make large payments online by simple clicks, saving her from the trouble of having to transport large sums of coins and bills over distance. Conventional money will bulk up if carried in large amounts. Another advantage is the efficiency of e-money, it is estimated that the US would save billions of dollars by moving from cheques to electronic payments. 

4) Thogh often refered to as the interest rate as whole, interest rate on different kinds of bonds tend fluctuate with slight different patterns over time. The interest rate on three-month treasury bills is far more dynamic than long-term corporate or Canadian Government bonds. In contrast with the latter two, three-month treasury bills interest rate also tend to be lower on average. Long-term corporate bonds will in average have highest interest rate.

5) Because the dollar is, now, worth more in relationship to foreign currencies, foreign-made jeans become cheaper than Canadian-made jeans. Canadian companies that make jeans should be happier when the Canadian dollar is weaker, because this should lead to an increase in sales of Canadian made goods. Also, a weaker Canadian dollar implies that goods exported abroad will cost less in foreign countries, therefore foreigners would be demanding more Canadian-made jeans as well. Companies that import jeans into Canada will prefer a stronger Canadian dollar because the company is buying from foreigners and a strong Canadian dollar will make foreign goods cheaper.

6) Bank of Canada is responsible for examining the books of the deposit-taking institutions and coordinates with federal agencies that are responsible for financial institution regulation. The Office of the Superintendent of Financial Institutions (OSFI) sets capital adequacy, accounting, and board-of-directors responsibility standards. It also conducts bank audits and coordinates with provincial securities commissions. The Canada Deposit Insurance Corporation (CDIC) provides insurance of up to $60,000 for each depositor at a bank, examines the books of insured banks, and imposes restrictions on assets they can hold.

7) Internationalization in financial markets have been growing as a result if the large increases in savings in foreign countries and deregulation of foreign markets. There has been innovations in the international bond market, where the selling of Eurobond, and deposits of Eurocurrencies are becoming more popular. The globalizaiton of capital markets has attained lenghts where foreign stock market indexes can be seen published daily in Canadian newspapers, such as The Globe and Mail: Report on Business and National Post: Financial Post.

8) The bank of Canada attempts to keep the inflation level at its target rate of 2 per cent. This range was stablished by the Bank of Canada along with the federal Government as a midpoint of the current fluctuation in CPI (1 to 3 per cent). Since the price of some more valatile components of the CPI tends to vary a lot in the short run, the Bank of Canada prefered to exclude them and use what is called the core CPI index as a measure of inflation. This helps them to better predict what the inflation level will be in the long run.