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Flashcards

Financial Markets

Angelie Sweet Buenaventura Financial Markets English 75 cards

Cards in this deck (75)

  1. 1Which of the following represents the financial intermediaries that facilitate the trade of financial instruments?Brokers and Dealers
  2. 2Which of the following BEST describes a financial instrument?It is the medium of exchange of a party's contractual obligation, where
    such a contract can be traded.
  3. 3Which of these occurs when the issuer offers the securities to a single investor, an institutional buyer, or a group of buyers?Limited public offer
  4. 4Which scenario BEST demonstrates an English auction?The prospective buyers commence the auction by submitting an initial bid
    price.
  5. 5Which of these describes the domestic market?The issuers who are residents of a country issue securities and
    subsequently trade them in that country.
  6. 6Which of the following sectors of the Bangko Sentral ng Pilipinas (BSP) conducts capital management, financial services, information technology support, etc.?Corporate Services Sector (CSS)
  7. 7Which of the following BEST describes the functions of the Security and Exchange Commission (SEC)?Administers oversight on the corporate sector, capital market participants,
    securities, etc
  8. 8Which of the following risks/social factors is BEST addressed through financial institutions' compliance to minimum technical standards and disclosure of relevant information to reflect integrity and smooth operations?Efficiency enhancement
  9. 9The following are the functions of the Bangko Sentral ng Pilipinas (BSP), EXCEPT:Provides discounts, advances, and financial support to the general public
    while maintaining its liquidity.
  10. 10Which of the following BEST describes the Capital Adequacy Ratio (CAR)?The ratio of total qualifying capital to risk-weighted assets computed
    under the risk-based capital adequacy framework.
  11. 11Which investment theory assumes that investors choose securities with maturities that satisfy their forecasted cash needs rather than their expectations of future interest rates?Market Segmentation
  12. 12Which of the following BEST describes the Preferred Habit Theory?It proposes that, although investors and borrowers may normally
    concentrate on a particular maturity market, certain events may cause them to
    wander from their "natural" market.
  13. 13A 1-year treasury bill has a coupon rate of 2%, and a 2-year treasury note has a coupon rate of 3%. Based on the pure expectations theory, what is the 1-year interest rate anticipated at t+1 (2nd year)?4.00980%
  14. 14Pag-asa Corp. plans to borrow P1,000,000 funds from Unlad Inc. The risk-free rate imposed on the loan is 6%. Unlad's debt margin is ½ of the imposed risk-free rate. How much interest rate should Unlad Inc. impose on Pag-asa Corp.?9%
  15. 15Which of the following describes a commercial paper?A short-term debt instrument issued only by well-known, creditworthy
    firms that are typically unsecured.
  16. 16Juan Dela Cruz is planning to invest in the money market. One alternative is to invest in a one (1)-year Treasury bill with a face value of P5,000 and an annual interest rate of 3%. Compute for the market price or market security value.P4,854.37
  17. 17The following statements describe the "banker’s acceptance,” EXCEPT:It is an alternative to short-term bank loans.
  18. 18Which of the following describes the participation of commercial banks in the bond market?They purchase bonds for their asset portfolio.
  19. 19These are the variation of the fixed-rate bonds where their coupon increases during the life of the bonds.Stepped-coupon bonds
  20. 20Which of the following describes the “sinking fund” characteristic of bonds?A method by which an organization sets aside money over time to retire its
    indebtedness by repaying or purchasing outstanding loans and securities held against the entity.
  21. 21Which of the following describes the “wide” classification of ordinary shares according to their ownership?Shares owned by unrelated individuals or institutional parties.
  22. 22What will happen when a firm is inconsistent in providing relevant information to its customers?The firm will not be able to maintain its rapport in terms of shared
    information.
  23. 23Which yield curve can be observed when short and long-term interest rates are the same?Flat
  24. 24Jolene desires to sell her shares from Jolly Been Foods Corporation. To do so, she finds a stockbroker, such as FB Capital Securities Inc., to sell her shares. In return, a commission will be paid to the broker. This is an example of:Conventional Brokerage
  25. 25The American multinational investment bank and financial services holding company J.P. Morgan Chase & Co. expanded its business in the Philippines. Which type of Foreign Direct Investment (FDI) is demonstrated?Horizontal
  26. 26Which of these describes the foreign market?The issuers who are residents of a country issue securities and subsequently trade them in that country.
  27. 27This sector of the Bangko Sentral ng Pilipinas (BSP) is responsible for the production, distribution, disposal, or retirement of currencies.Currency Management Sector (CMS)
  28. 28Which of these occurs when issuers are open to receive bids for their securities at all times?Tap Issue
  29. 29They are the parties who are willing to pay the required return to obtain additional funds to finance their investment initiative.Borrowers
  30. 30Which of these describes customer ratio?It is the ratio of the total population to the total number of domestic banking offices.
  31. 31It is the medium of exchange of a party's contractual obligation, where such a contract can be traded.Financial Instrument
  32. 32The Philippine Competition Commission (PCC) is an independent quasi-judicial body mandated to implement the national competition policy in the country. The national competition policy is a comprehensive framework that steers regulation in promoting free and fair market competition in the country. Which type of risk/ social factor is being addressed by PCC?Efficiency enhancement
  33. 33Which scenario demonstrates the Dutch auction method?The seller begins the sale at a high price.
  34. 34The Bangko Sentral ng Pilipinas (BSP) formulates and issues a monetary policy to influence money supply to maintain price stability. Which function of BSP is demonstrated?Liquidity Management
  35. 35It is an attached agency of the Department of Trade and Industry (DTI) created under E.O. No. 226.Board of Investments (BOI)
  36. 36Which theory is useful in explaining the level of the general movement of interest rates for a particular country?Loanable Funds
  37. 37A 1-year treasury bill has a coupon rate of 2%, and a 2-year treasury note has a coupon rate of 3%. Based on the pure expectations theory, what is the 1-year interest rate anticipated at t+1 (2nd year)?4.00980%
    Feedback: CORRECT! The formula to compute for the interest rate is
    (1+ti2 )2 = (1+tii) (1+ t+1r1);
    Substituting the given values:
    (1.03)2= (1.02) (1+x).
    Then, finding the value of x:
    1.0609 = 1.02 + 1.02x = 4.00980%
  38. 38This theory believes that investors prefer short-term liquid securities and may be willing only to invest in long-term securities if compensated with a premium for the lower degree of liquidity.Liquidity Preference
  39. 39Ana Macaraig is planning to invest in the money market. One alternative is to invest in a one (1)-year Treasury bill with a face value of P10,000 and an annual interest rate of 3%. Compute for the market price or market security value.P9,708.74
    Feedback: CORRECT! The formula to compute for the market price is:
    market security value = face value of the security/ (1+interest rate)n;
    where n is the number of periods. Substituting the given values:
    market security value
    = P10,000/ (1+3%)1
    = P10,000/1.03
    = P9,708.74
  40. 40KNJ Company issued bonds with a 5% nominal rate for P1,000 par value, payable for 10 years. The bonds were sold for P700. How much is the interest rate of the said bond in the market?9.41 %
    Feedback: CORRECT! The formula to compute for the interest rate is
    i = {I + [(V-M)/n]/ (V+M)/2} x 100%; Substituting the given values:
    (1,000) (5%) + [(1,000-700)/10]/ (1,000+700)/2 x 100%
    =[50+(300/100)]/(1,700/2) x 100%
    = (50+30)/850 x 100%
    = 80/850 x 100%
    = 9.41%
  41. 41These entities buy and sell money market securities to manage their cash.Commercial Non-Financial Institutions
  42. 42ABC Corp. plans to borrow P1,000,000 funds from XYZ Inc. The risk-free rate imposed on the loan is 5%. XYZ's debt margin is 3%. How much interest rate should XYZ Inc. impose on ABC Corp.?8%
    Feedback: CORRECT! The formula to compute for the interest rate is
    i=Rf+ Dm
    Substituting the given values:
    I = 5%+ 3%
    = 8%
  43. 43Which credit rating, assigned by Standard and Poor's Corporation (S&P), indicates that the obligor's capacity to meet its financial commitments is extremely strong?AAA
  44. 44They issue treasury securities, sell certificates of deposits, extend loans, and offer individual investor accounts invested in money markets.Commercial banks
  45. 45Which of these describes T-bills?They are government securities issued by the Bureau of the Treasury (BTR).
  46. 46Which of these describes the participation of securities firms in the stock market?They place new issues of stock.
  47. 47Which of these describes the participation of investment banking firms in the bond market?They perform underwriting activities for the government and corporations.
  48. 48Which type of order is only valid until the end of the business day?Day
  49. 49They are peso-denominated securities regularly issued by the national government.Treasury Bonds
  50. 50These are bonds with a coupon that remains constant throughout the life of the bond.Fixed-rate bonds
  51. 51Which yield curve can be observed when bond investors expect the economy to grow at a normal pace, without significant changes in the rate of inflation or major interruptions in available credit?Upward
  52. 52This characteristic of bonds pertains to the amount of money a holder will get back once a bond matures.Par-Value
  53. 53What will be the end consequence when a firm cannot meet its commitment because it fails to forecast and mitigate the market risks?The firm will experience systemic instability.
  54. 54Which of these DOES NOT describe banker's acceptance?It is an alternative to short-term bank loans.
  55. 55Which of these describes the private classification of ordinary shares according to their ownership?Generally, shares are not publicly traded.
  56. 56Jessa desires to sell her shares from GMA Network, Inc. To do so, she finds a stockbroker, such as A.B. Capital Securities Inc., to sell her shares. In return, a commission will be paid to the broker. This is an example of:Conventional Brokerage
  57. 57It is also known as the auction market, wherein the buyers and sellers propose their prices through their brokers, who convey the bid in a centralized location.Order-Driven
  58. 58It refers to the amount per share that will be received if all the company's assets are sold based on its exact accounting values.Book Value (B.V.) per Share
  59. 59Which stock valuation model assumes that dividends will remain fixed and will not change in the future?Zero-growth Model
  60. 60How much is the market capitalization of large-cap companies?Between 10 billion to 200 billion
  61. 61Which of these demonstrates transparency in the electronic communications network (ECN)?Traders in the ECN can easily view if there are unfilled orders on time.
  62. 62It is the financial markets sector where financial instruments that have short-term maturity or be redeemed in one (1) year or less from the date of issuance are traded.Money
  63. 63This unique feature of preference shares means that all dividends in arrears, together with the current dividend, should be paid before paying the shareholders' dividends.Cumulative
  64. 64Jessie sells her 10,000 shares from Aboitiz Equity Venture at the Philippine Stock Exchange (PSE). Initially, the shares were offered at a spot price of P150.00 per share. Many buyers offer to buy the said shares; thus, increasing the price of each share at P180.00 (increase in demand results in a price rise). The shares were sold at the agreed price of P175.00. Which nature of financial markets is described?Price Determination
  65. 65These represent ownership claims on a company's net assets.Equity securities
  66. 66It is a diversified portfolio of pooled investor money that can issue an unlimited number of shares.Open-End Fund
  67. 67These are pre-packaged investments that combine underlying assets such as shares, bonds, or indices.Structured Products
  68. 68It refers to a country's ability to pay back its debts.Economic risk
  69. 69Which of these describes the classification of collective investment schemes (CIS) based on corporate structure?It is in the form of an entity, such as an investment company.
  70. 70These are financial instruments that comply with Islamic laws known as Sharia.Sukuk Investments
  71. 71Which of these describes ordinary nonvoting shares?These are offered by the companies that want to raise capital but do not want to give up any voting control.
  72. 72Which of these describes the variable universal life insurance (VUL)?In its basic form, it is a "permanent life insurance" that pays off when the policyholder dies.
  73. 73It provides financing of private-enterprise investment in developing countries around the world, through both loans and direct investments.International Finance Corporation (IFC)
  74. 74Huawei Technologies Co., Ltd., a China-based corporation, expanded its business and established stores in the Philippines. This is an example of:Horizontal Foreign Direct Investments (FDIs)
  75. 75ABC Manufacturing acquires an interest in a foreign company that supplies parts or raw materials required in producing a product sold by ABC. This is an example of:Vertical Foreign Direct Investments (FDIs)

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Financial Markets Flashcards on Financial Markets, created by Angelie Sweet Buenaventura on 23/07/2023.
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