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AFM 121 Final Exam Questions & Answers 2023/2024 $8.49
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AFM 121 Final Exam Questions & Answers 2023/2024
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AFM 121 Final Exam Questions & Answers 2023/2024 What is a market? - ANSWER-- has buyers and sellers - we exchange capital in a capital market - capital goes from those who have it to those who require it - this exchange is done because those that have extra wealth can provide capital an...

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  • September 14, 2023
  • 9
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

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  • AFM 121
  • AFM 121

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AFM 121 Final Exam Questions &
Answers 2023/2024

What is a market? - ANSWER-- has buyers and sellers

- we exchange capital in a capital market

- capital goes from those who have it to those who require it

- this exchange is done because those that have extra wealth can provide capital and get a return



3 components of the transfer of capital - ANSWER-financial markets, financial instruments,
intermediaries



What is capital? - ANSWER-human capital:

- people in the labour force



financial/investment capital:

- savings of people, corporations, and governments



direct investment - ANSWER-investing in things like land, real estate, or equipment



indirect investment - ANSWER-invest in financial stocks, bonds, or treasury bills



we want capital to be... (capital efficiency entails 3 things) - ANSWER-- mobile

- scarce

- sensitive



if i have capital to invest, i am only going to do so if it is... - ANSWER-- easy

- cheap

- generates a good return

, institutional investors - ANSWER-pension funds (ontario teachers, Canada Pension PLan Invest Board),
mutual funds (Trimark, AGF)



retail investors - ANSWER-individuals like us (citizens)



foreign investors - ANSWER-- can include foreign retail, institutional and government investors

- investments are made directly in Canadian firms or through stocks/bonds for Canadian firms listed on
foreign exchanges



financial instruments - ANSWER-the mechanisms by which capital is transferred



debt - ANSWER-- funds that are borrowed

- these funds are paid back at a specific date (the maturity date)

- interest is paid between the borrowing and maturity date



equity - ANSWER-- typically in the form of stacks/shares in a company (ownership)

- you own part of the company when you are an equity investor

- have voting privileges and may receive regular dividend payments



investment funds - ANSWER-- buys and sells stocks/bonds (typically through a mutual fund)



derivatives - ANSWER-- these products derive their value from another asset (stock, bond, currency)

- is often used for hedging



private equity - ANSWER-- invest in both debt and equity

- investments are typically made directly in companies rather than purchasing stocks or bonds

- funds are provided by pension funds, endowments, or wealthy individuals

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