Capital Market - Midterm Quiz (Chapter 4)

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Capital Market - Midterm Quiz (Chapter 4) - Quiz

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Questions and Answers
  • 1. 

    The Philippine domestic bond market consists of short- and long-term bonds, mainlyissued by the ____________________..

    • A. 

      Private Entities

    • B. 

      National Government

    • C. 

      Private Companies

    • D. 

      All of the above

    Correct Answer
    B. National Government
    Explanation
    The correct answer is National Government. The Philippine domestic bond market primarily consists of short- and long-term bonds issued by the National Government. This means that the government is the main issuer of bonds in the country's domestic market.

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  • 2. 

    The Philippine bond market is dominated mainly by ________________.

    • A. 

      Corporate Bonds and T-Bills

    • B. 

      Municipal Bonds

    • C. 

      Treasury Notes and Bonds

    • D. 

      None of the above

    Correct Answer
    C. Treasury Notes and Bonds
    Explanation
    The correct answer is Treasury Notes and Bonds. The Philippine bond market is mainly dominated by Treasury Notes and Bonds. These are debt securities issued by the Philippine government to finance its operations and projects. They are considered to be low-risk investments and are popular among both domestic and foreign investors. Corporate Bonds and T-Bills are also part of the Philippine bond market but they are not the main dominating factors. Municipal Bonds, on the other hand, are not as prevalent in the Philippine bond market compared to Treasury Notes and Bonds.

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  • 3. 

    Which of the following is issued by private entities?

    • A. 

      Straight Bonds

    • B. 

      Corporate Notes

    • C. 

      Corporate Bonds

    • D. 

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    All of the options mentioned (Straight Bonds, Corporate Notes, and Corporate Bonds) are issued by private entities. Straight Bonds are debt securities that are issued by private companies to raise capital. Corporate Notes are short-term debt instruments issued by private companies to meet their short-term financing needs. Corporate Bonds are long-term debt securities issued by private companies to finance their operations or expansion. Therefore, all of these options are issued by private entities.

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  • 4. 

    Treasury notes is a security issued by the national government with maturity of _____________.

    • A. 

      Less than 1 year

    • B. 

      1-10 years

    • C. 

      10-30 years

    • D. 

      More than 10 years

    Correct Answer
    B. 1-10 years
    Explanation
    Treasury notes are a type of security issued by the national government that have a maturity period of 1-10 years. This means that when an individual invests in treasury notes, they can expect to receive the principal amount plus interest within a period of 1-10 years. The specific maturity period may vary depending on the terms set by the government at the time of issuance.

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  • 5. 

    Issued by companies with a history of proven existence over the long run. 

    • A. 

      Speculative Stock

    • B. 

      Growth Stock

    • C. 

      Defensive Stock

    • D. 

      Blue-chip Stock

    Correct Answer
    D. Blue-chip Stock
    Explanation
    Blue-chip stocks are issued by companies with a history of proven existence over the long run. These companies are typically large, well-established, and financially stable. They have a track record of consistent earnings and dividends, making them less risky investments compared to speculative or growth stocks. Blue-chip stocks are considered to be reliable and often attract investors seeking stability and steady returns.

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  • 6. 

    This is opposite of the Blue chip stock.

    • A. 

      Speculative Stock

    • B. 

      Growth Stock

    • C. 

      Defensive Stock

    • D. 

      Income Stock

    Correct Answer
    A. Speculative Stock
    Explanation
    A speculative stock is the opposite of a Blue chip stock because it is considered to be high-risk and volatile. Blue chip stocks are known for their stability and reliability, while speculative stocks are more unpredictable and can experience significant price fluctuations. Investors who are willing to take on higher risks may choose to invest in speculative stocks in the hopes of making substantial profits, but there is also a greater chance of losing money. Therefore, a speculative stock is the opposite of a Blue chip stock in terms of risk and stability.

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  • 7. 

    This has the highest claims in the corporation upon liquidity.

    • A. 

      Common Stockholder

    • B. 

      Preferred Stockholder

    • C. 

      Bondholder

    • D. 

      None of the above

    Correct Answer
    C. Bondholder
    Explanation
    A bondholder is a person or entity that has purchased a bond issued by a corporation. Bonds are a form of debt, where the corporation borrows money from bondholders in exchange for regular interest payments and the promise to repay the principal amount at maturity. Bondholders have the highest claims on the corporation's assets and cash flows in case of liquidation or bankruptcy. This means that bondholders are prioritized over common stockholders and preferred stockholders when it comes to receiving payments from the corporation. Therefore, the statement "This has the highest claims in the corporation upon liquidity" refers to bondholders.

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  • 8. 

    It is the money amount the bond will be worth at its maturity, and is also the reference amount the bond issuer uses when calculating interest payments.

    • A. 

      Maturity Value

    • B. 

      Face Value

    • C. 

      Coupon Rate

    • D. 

      Maturity Rate

    Correct Answer
    B. Face Value
    Explanation
    The face value of a bond is the amount of money that the bond will be worth at its maturity. It is also the reference amount that the bond issuer uses when calculating interest payments. This means that the face value represents the principal amount that will be repaid to the bondholder when the bond reaches its maturity date. It is an important factor in determining the interest payments and overall value of the bond.

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  • 9. 

    A share of stock provides an ownership interest in the company, along with voting rights and possible dividends.

    • A. 

      Preferred Stock

    • B. 

      Common Stock

    • C. 

      Preemptive Stock

    • D. 

      All of the above

    Correct Answer
    B. Common Stock
    Explanation
    Common stock is a type of stock that provides ownership in a company, along with voting rights and the possibility of receiving dividends. This means that shareholders who own common stock have a say in the company's decision-making process and can participate in the distribution of profits through dividends. Preferred stock, on the other hand, typically does not offer voting rights and has a fixed dividend rate. Preemptive stock is not a recognized term in finance. Therefore, the correct answer is common stock.

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  • 10. 

    This includes electing directors and proposals for fundamental changes affecting the company such as mergers or liquidation.

    • A. 

      Voting Rights

    • B. 

      Rights related to the assets of the corporation

    • C. 

      Rights related to the transfer of stock

    • D. 

      Rights to inspect the records and books of the corporation.

    Correct Answer
    A. Voting Rights
    Explanation
    Voting rights refer to the rights of shareholders to participate in the decision-making process of a company. This includes the right to elect directors, who are responsible for overseeing the company's operations, as well as the right to vote on proposals for significant changes such as mergers or liquidation. By exercising their voting rights, shareholders can have a say in the governance and direction of the company.

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