Alexa is a 58-year old mother who has been investing for over 20 years now. She wants to be able to save enough money to buy a house before she retires in 2 years time. Which among the following are factors used to estimate Alexa’s risk capacity?

Alexa wants to save enough money to buy a house

Which of the following best exemplifies a want expense?

Purchasing an affordable house to live in

Andrea’s financial goal for her investments is capital preservation. Given this, what investment should she have mainly purchased?

On January 25, Andrea invested in a 90-day T-Bill which generated around 2% return to counter the effects of inflation.

Andrea bought land in BGC 3 years ago, and was very happy to see that the price of the land increased by around P2M from the date of purchase.

Andrea is currently investing in bonds with average yields of around 8% annually.

Andrea bought 100 shares of JFC (stock) at the price of P243 per share. The current stock price of JFC is P265.

Emily is an investment banker for IMG based in the Netherlands. In IMG’s policies, she is restricted from investing in speculative bonds. For this purpose, Emily makes it a point to check and monitor changes in credit ratings of Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings. Which among the following countries is Emily most likely to not invest in or buy bonds from?

Greece, whose credit ratings last updated by S&P to be BB- with positive outlook, BB with positive outlook for Fitch’s and B1 with stable outlook for Moody’s

Denmark, whose credit rating remained at AAA for S&P and Fitch, and at Aaa for Moody’s, all with a stable outlook

USA, whose credit rating was last downgraded by S&P to AA+ from AAA last 2011 due to concerns of budget deficits

Philippines, whose credit rating was last updated by S&P to BBB+ with negative outlook last April 2019, and last updated by Fitch to BBB with positive outlook last February 2020

Luna is an investment banker for MoonLife Financial. In MoonLife’s policies, she is restricted from investing in high yield bonds. For this purpose, Luna makes it a point to check and monitor changes in credit ratings of Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings. Which among the following countries is Luna most likely to invest in or buy bonds from?

Denmark, whose credit rating remained at AAA for S&P and Fitch, and at Aaa for Moody’s, all with a stable outlook

Philippines, whose credit rating was last updated by S&P to BBB+ with negative outlook last April 2019, and last updated by Fitch to BBB with positive outlook last February 2020

Denmark, whose credit rating remained at AAA for S&P and Fitch, and at Aaa for Moody’s, all with a stable outlook

USA, whose credit rating was last downgraded by S&P to AA+ from AAA last 2011 due to concerns of budget deficits

Greece, whose credit ratings last updated by S&P to be BB- with positive outlook, BB with positive outlook for Fitch’s and B1 with stable outlook for Moody’s

Margaret is a newbie investor. She aims to lower her portfolio volatility. In order to do that she has to have a selection of assets that would make her portfolio “Markowitz-efficient”. Assuming that all assets have similar expected returns, which of the following would ensure that Margaret will incur the least amount of risk for a desired level of return?

A set of assets with returns that are negatively correlated.

A set of assets with returns that are consistently uncorrelated or has near zero correlation.

A set of assets that are consistently uncorrelated or has near zero correlation.

A set of assets with returns that are negatively correlated.

A set of assets that are negatively correlated.

The following statements pertain to basic concepts in asset allocation and investments. Identify which among the following is true:

Risk aversion of most investors in a market causes riskier securities to have higher expected returns.

An asset held as part of a portfolio is generally riskier than the same asset held in isolation.

A bear market is a sound market to invest in as many equities gain value and share prices are generally stable.

The PSEi is composed of a fixed basket of 328 companies as of 2019 which represents the general movement of the Philippine stock market.

Mr. Rivera, a foreign investor, uses an investment strategy where he divides up the total amount to be invested across periodic purchases of a target asset. What is the main purpose of this strategy?

To reduce the impact of volatility on the overall purchase

To reduce the impact of economic inflation

Ms. Rona recently started investing in stocks for the long term. However, she saw drastic changes in the prices of her investments. Which of the following would be a good reason to sell?

She reassessed her risk-profile and found that stocks aren’t suited for her.

A post online suggests a better stock pick.

Stock B’s price doubled. It’s an opportunity to earn a lot

Stock A’s price fell by 15%. It’s best to cut her losses.

Ruben started investing 5 years ago and had a moderate investor’s profile. Upon reviewing the performance of his investments, he decided to rebalance his portfolio. Which of the following is a good reason behind this decision?

He wants to maintain his asset allocation and risk-reward profile.

There is a new fad in investments.

His portfolio is performing just as he planned.

He sees an opportunity in more aggressive investments.

An equity fund significantly outperformed its benchmark for 3 years and similarly underperformed for 2 years. You can infer that the fund ________.

Has a different asset mix than the benchmark it is tracking

Has an incompetent fund manager

Performs better than its peer group

Which of the following is not likely to increase GDP?

Raising government revenue by increasing tax rates

Php300-billion cash injection to the market through bond purchases

BSP lowering the benchmark interest rate

Infrastructure projects like the “Build, Build, Build” Program

The following include tax-advantaged investments in the Philippines, except for:

Roth Individual Retirement Account

Personal Equity & Retirement Account

Personal Equity and Savings Option Fund

Which of the following companies are part of a fixed basket of common stocks of listed companies, carefully selected to represent the general movement of the Philippine stock market?

The Philippine Stock Exchange, Inc.

[kazoku 6] Upjfa Finance Academy 52.2 Final Exam

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| Written by Fin Acad

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Quizzes Created: 11 | Total Attempts: 262

Questions: 50 | Attempts: 23 | Updated: Jan 27, 2023

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[kazoku 6] Upjfa Finance Academy 52.2 Final Exam - Quiz

Choose the best answer to the following questions. Good luck!

Questions and Answers

1.

April is a working student who earns ₱15,000 monthly. As a quick and simple rule of thumb, how much money would you recommend for her to allocate for her savings, needs, and wants respectively?
- A.
  
  7500, 4500, 3000
- B.
  
  4000, 9000, 1000
- C.
  
  7500, 7500, 0
- D.
  
  3000, 7500, 4500
Correct Answer
D. 3000, 7500, 4500

Explanation
Based on the given information, it is recommended for April to allocate ₱3,000 for her savings, ₱7,500 for her needs, and ₱4,500 for her wants. This allocation ensures that she is setting aside a portion of her income for future goals and emergencies (savings), covering her essential expenses (needs), and also allowing herself some discretionary spending for things she desires (wants). This balanced approach helps her maintain financial stability and prioritize her financial well-being.

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2.

If you are 18 right now, what is the best age for you to begin investing?
- A.
  
  18
- B.
  
  21
- C.
  
  25
- D.
  
  35
Correct Answer
A. 18

Explanation
The best age for someone to begin investing is 18. This is because starting early allows for more time to grow investments and take advantage of compounding interest. By investing at 18, individuals have the opportunity to learn about different investment options, develop good financial habits, and potentially build a solid financial foundation for the future. Starting early also allows for more time to recover from any potential losses and take advantage of long-term market trends.

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3.

Which of the following choices can be considered as something attributable more to an investor’s risk tolerance rather than their risk capacity?
- A.
  
  Investor's Experience
- B.
  
  Time Horizon of Investment
- C.
  
  Income
- D.
  
  Age
Correct Answer
A. Investor's Experience

Explanation
Investor's experience can be considered as something attributable more to an investor's risk tolerance rather than their risk capacity. Risk tolerance refers to an individual's willingness to take on risk, which can be influenced by their past experiences with investments. If an investor has had positive experiences and successful outcomes in the past, they may have a higher risk tolerance and be more willing to take on risk. On the other hand, if an investor has had negative experiences or losses, they may have a lower risk tolerance and be more risk-averse. Therefore, investor's experience is more related to their risk tolerance rather than their risk capacity, which is determined by factors such as financial resources and investment goals.

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4.

Alexa is a 58-year old mother who has been investing for over 20 years now. She wants to be able to save enough money to buy a house before she retires in 2 years time. Which among the following are factors used to estimate Alexa’s risk capacity?
- A.
  
  Both of these factors
- B.
  
  Alexa will retire in 2 years
- C.
  
  Alexa wants to save enough money to buy a house
- D.
  
  Neither of these factors
Correct Answer
A. Both of these factors

Explanation
Both of these factors are used to estimate Alexa's risk capacity. Alexa's retirement timeline and her goal of saving enough money to buy a house before retiring are both important factors in determining how much risk she can afford to take with her investments. These factors help assess her financial situation, time horizon, and investment objectives, which are crucial in determining her risk tolerance and capacity.

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5.

Which of the following best exemplifies a want expense?
- A.
  
  Eating steak everyday
- B.
  
  Purchasing an affordable house to live in
- C.
  
  Replacing a broken phone
- D.
  
  Purchasing a second hand car
Correct Answer
A. Eating steak everyday

Explanation
Eating steak everyday best exemplifies a want expense because it is not a necessity for survival. It is a luxury and a desire rather than a basic need. Purchasing an affordable house to live in, replacing a broken phone, and purchasing a second-hand car can all be seen as necessary expenses or investments for practical reasons. However, eating steak everyday is not essential and falls under the category of a want rather than a need.

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6.

Andrea’s financial goal for her investments is capital preservation. Given this, what investment should she have mainly purchased?
- A.
  
  On January 25, Andrea invested in a 90-day T-Bill which generated around 2% return to counter the effects of inflation.
- B.
  
  Andrea bought land in BGC 3 years ago, and was very happy to see that the price of the land increased by around P2M from the date of purchase.
- C.
  
  Andrea is currently investing in bonds with average yields of around 8% annually.
- D.
  
  Andrea bought 100 shares of JFC (stock) at the price of P243 per share. The current stock price of JFC is P265.
Correct Answer
A. On January 25, Andrea invested in a 90-day T-Bill which generated around 2% return to counter the effects of inflation.

Explanation
Andrea's financial goal for her investments is capital preservation, which means she wants to protect the value of her investments and prevent them from decreasing due to inflation or other factors. Investing in a 90-day T-Bill that generated around a 2% return would help her achieve this goal, as it would provide a stable and relatively low-risk investment option. By countering the effects of inflation, the T-Bill would help preserve the value of Andrea's capital.

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7.

The price of a fried chicken meal is Php50 in 2020 and Php55 in 2021. Assuming that this meal is the only thing people buy, what is the inflation rate from 2020 to 2021?
- A.
  
  10.00
- B.
  
  5.00
- C.
  
  9.09
- D.
  
  4.88
Correct Answer
A. 10.00

Explanation
The inflation rate from 2020 to 2021 can be calculated by finding the percentage increase in price. The price increased from Php50 to Php55, which is a 10% increase. Therefore, the inflation rate is 10.00%.

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8.

Php1,000.00 is placed in a savings account compounded semiannually with a stated annual rate of 2%. Its value one year from now and two years from now, respectively, is:
- A.
  
  Php1,020.10, Php1,040.60
- B.
  
  Php1,020.00, Php1,040.00
- C.
  
  Php1,020.00, Php1,040.40
- D.
  
  Php1,020.10, Php1,040.00
Correct Answer
A. Php1,020.10, Php1,040.60

Explanation
The correct answer is Php1,020.10, Php1,040.60. This is because the savings account is compounded semiannually, meaning that interest is added to the account twice a year. The stated annual rate of 2% is divided by 2 to get the semiannual interest rate of 1%. After one year, the initial amount of Php1,000.00 will earn Php10.00 in interest (1% of Php1,000.00), resulting in a total value of Php1,010.00. After two years, the initial amount of Php1,010.00 will earn Php10.10 in interest (1% of Php1,010.00), resulting in a total value of Php1,020.10.

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9.

Php1,000.00 is placed in a savings account compounded semiannually with an effective annual rate of 2%. Its value one year from now and two years from now, respectively, is:
- A.
  
  Php1,020.00, Php1,040.40
- B.
  
  Php1,020.10, Php1,040.60
- C.
  
  Php1,020.00, Php1,040.00
- D.
  
  Php1,020.10, Php1,040.00
Correct Answer
A. Php1,020.00, Php1,040.40

Explanation
The effective annual rate of 2% means that the interest is compounded twice a year. After one year, the initial amount of Php1,000.00 will grow by 1% (2% divided by 2) in the first six months and another 1% in the second six months. Therefore, the value after one year is Php1,000.00 + (Php1,000.00 * 0.01) + (Php1,000.00 * 0.01) = Php1,020.00. After two years, the same process is repeated, so the value after two years is Php1,020.00 + (Php1,020.00 * 0.01) + (Php1,020.00 * 0.01) = Php1,040.40.

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10.

Emily is an investment banker for IMG based in the Netherlands. In IMG’s policies, she is restricted from investing in speculative bonds. For this purpose, Emily makes it a point to check and monitor changes in credit ratings of Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings. Which among the following countries is Emily most likely to not invest in or buy bonds from?
- A.
  
  Greece, whose credit ratings last updated by S&P to be BB- with positive outlook, BB with positive outlook for Fitch’s and B1 with stable outlook for Moody’s
- B.
  
  Denmark, whose credit rating remained at AAA for S&P and Fitch, and at Aaa for Moody’s, all with a stable outlook
- C.
  
  USA, whose credit rating was last downgraded by S&P to AA+ from AAA last 2011 due to concerns of budget deficits
- D.
  
  Philippines, whose credit rating was last updated by S&P to BBB+ with negative outlook last April 2019, and last updated by Fitch to BBB with positive outlook last February 2020
Correct Answer
A. Greece, whose credit ratings last updated by S&P to be BB- with positive outlook, BB with positive outlook for Fitch’s and B1 with stable outlook for Moody’s

Explanation
Emily is restricted from investing in speculative bonds, which means she cannot invest in bonds with low credit ratings or negative outlooks. Among the given options, Greece has the lowest credit ratings and a positive outlook from S&P, Fitch, and Moody's. Therefore, Emily is most likely not to invest in or buy bonds from Greece.

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11.

Luna is an investment banker for MoonLife Financial. In MoonLife’s policies, she is restricted from investing in high yield bonds. For this purpose, Luna makes it a point to check and monitor changes in credit ratings of Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings. Which among the following countries is Luna most likely to invest in or buy bonds from?
- A.
  
  Philippines, whose credit rating was last updated by S&P to BBB+ with negative outlook last April 2019, and last updated by Fitch to BBB with positive outlook last February 2020
- B.
  
  Denmark, whose credit rating remained at AAA for S&P and Fitch, and at Aaa for Moody’s, all with a stable outlook
- C.
  
  USA, whose credit rating was last downgraded by S&P to AA+ from AAA last 2011 due to concerns of budget deficits
- D.
  
  Greece, whose credit ratings last updated by S&P to be BB- with positive outlook, BB with positive outlook for Fitch’s and B1 with stable outlook for Moody’s
Correct Answer
B. Denmark, whose credit rating remained at AAA for S&P and Fitch, and at Aaa for Moody’s, all with a stable outlook

Explanation
Luna is restricted from investing in high yield bonds, so she would prefer to invest in countries with a high credit rating. Denmark has a credit rating of AAA from both Standard & Poor's and Fitch, and Aaa from Moody's, indicating a very low risk of default. Additionally, all three agencies have given Denmark a stable outlook, further indicating its financial stability. Therefore, Luna is most likely to invest in or buy bonds from Denmark.

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12.

Arthur is a bond investor. Like any other investor, he aims to get the best return possible. He is currently considering a zero-coupon bond trading at $925 and has a par value of $1000 which is paid at maturity after one year. If current interest rates were to rise, giving newly-issued bonds a yield of 10%, will the zero-coupon bond still be attractive to Arthur? What will most likely happen to the price of the pre-existing zero-coupon bond?
- A.
  
  No; The price will decrease
- B.
  
  Yes; The price will not change
- C.
  
  Yes; The price will increase
- D.
  
  No, the price will increase
Correct Answer
A. No; The price will decrease

Explanation
If current interest rates were to rise, newly-issued bonds would offer a higher yield of 10%. This means that the zero-coupon bond, which offers a lower yield, would become less attractive to investors like Arthur. As a result, the demand for the zero-coupon bond would decrease, causing its price to decrease as well. Therefore, the correct answer is "No; The price will decrease."

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13.

Margaret is a newbie investor. She aims to lower her portfolio volatility. In order to do that she has to have a selection of assets that would make her portfolio “Markowitz-efficient”. Assuming that all assets have similar expected returns, which of the following would ensure that Margaret will incur the least amount of risk for a desired level of return?
- A.
  
  A set of assets with returns that are consistently uncorrelated or has near zero correlation.
- B.
  
  A set of assets that are consistently uncorrelated or has near zero correlation.
- C.
  
  A set of assets with returns that are negatively correlated.
- D.
  
  A set of assets that are negatively correlated.
Correct Answer
C. A set of assets with returns that are negatively correlated.

Explanation
A set of assets with returns that are negatively correlated would ensure that Margaret incurs the least amount of risk for a desired level of return. Negative correlation means that when the return of one asset is high, the return of the other asset is low, and vice versa. This helps to reduce overall portfolio volatility because when one asset performs poorly, the other asset is likely to perform well, offsetting the losses. By having assets that are negatively correlated, Margaret can diversify her portfolio and lower the overall risk.

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14.

The following statements pertain to basic concepts in asset allocation and investments. Identify which among the following is true:
- A.
  
  Risk aversion of most investors in a market causes riskier securities to have higher expected returns.
- B.
  
  An asset held as part of a portfolio is generally riskier than the same asset held in isolation.
- C.
  
  A bear market is a sound market to invest in as many equities gain value and share prices are generally stable.
- D.
  
  The PSEi is composed of a fixed basket of 328 companies as of 2019 which represents the general movement of the Philippine stock market.
Correct Answer
A. Risk aversion of most investors in a market causes riskier securities to have higher expected returns.

Explanation
The statement that risk aversion of most investors in a market causes riskier securities to have higher expected returns is true. This is because when investors are risk-averse, they are less willing to invest in riskier securities, which leads to a decrease in demand for those securities. As a result, the price of these riskier securities decreases, causing their expected returns to increase. Conversely, safer securities become more in demand, leading to higher prices and lower expected returns. This relationship between risk aversion and expected returns is a fundamental concept in asset allocation and investments.

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15.

Mr. Rivera, a foreign investor, uses an investment strategy where he divides up the total amount to be invested across periodic purchases of a target asset. What is the main purpose of this strategy?
- A.
  
  To reduce the impact of volatility on the overall purchase
- B.
  
  To maximize returns
- C.
  
  To reduce the impact of economic inflation
- D.
  
  All of the choices are correct
Correct Answer
A. To reduce the impact of volatility on the overall purchase

Explanation
The main purpose of Mr. Rivera's investment strategy is to reduce the impact of volatility on the overall purchase. By dividing up the total amount to be invested across periodic purchases of a target asset, Mr. Rivera can mitigate the risk of investing a large sum of money at once and potentially experiencing significant losses due to market volatility. This strategy allows for a more balanced approach to investing and helps to smooth out the impact of market fluctuations on the overall purchase.

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16.

Mykie is planning to buy stocks through Philstocks. If she is planning to earn solely through capital gains, how much should a stock’s price increase for her to break-even?
- A.
  
  1.09%
- B.
  
  0%
- C.
  
  10%
- D.
  
  0.25%
Correct Answer
A. 1.09%

Explanation
To break-even solely through capital gains, Mykie needs the stock's price to increase by the same percentage as the transaction costs incurred when buying the stock. The transaction costs are typically around 1.09% of the stock's price. Therefore, the stock's price should increase by 1.09% for Mykie to break-even.

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17.

Given the following candlestick chart, which day did the stock’s price open at 112, closed at 114, had the highest price at 115, and lowest at 111?
- A.
  
  April 6
- B.
  
  April 2
- C.
  
  April 7
- D.
  
  April 9
Correct Answer
A. April 6

Explanation
Based on the given information, the stock's price opened at 112, closed at 114, had the highest price at 115, and lowest at 111. Among the given options, April 6 is the only date that satisfies all these conditions. Therefore, the correct answer is April 6.

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18.

Ms. Rona recently started investing in stocks for the long term. However, she saw drastic changes in the prices of her investments. Which of the following would be a good reason to sell?
- A.
  
  She reassessed her risk-profile and found that stocks aren’t suited for her.
- B.
  
  A post online suggests a better stock pick.
- C.
  
  Stock B’s price doubled. It’s an opportunity to earn a lot
- D.
  
  Stock A’s price fell by 15%. It’s best to cut her losses.
Correct Answer
A. She reassessed her risk-profile and found that stocks aren’t suited for her.

Explanation
The correct answer is "She reassessed her risk-profile and found that stocks aren't suited for her." This is a good reason to sell because if Ms. Rona realizes that stocks are not suitable for her risk tolerance, it is better for her to exit her investments and find alternative investment options that align with her risk profile. It is important for investors to regularly reassess their risk tolerance and make adjustments to their investment strategy accordingly.

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19.

Ruben started investing 5 years ago and had a moderate investor’s profile. Upon reviewing the performance of his investments, he decided to rebalance his portfolio. Which of the following is a good reason behind this decision?
- A.
  
  He wants to maintain his asset allocation and risk-reward profile.
- B.
  
  There is a new fad in investments.
- C.
  
  His portfolio is performing just as he planned.
- D.
  
  He sees an opportunity in more aggressive investments.
Correct Answer
A. He wants to maintain his asset allocation and risk-reward profile.

Explanation
Ruben's decision to rebalance his portfolio suggests that he wants to maintain his asset allocation and risk-reward profile. Rebalancing involves adjusting the proportions of different assets in a portfolio to ensure that they align with the investor's desired allocation and risk tolerance. By rebalancing, Ruben aims to bring his portfolio back in line with his original investment strategy and maintain his desired level of risk and potential reward. This decision is based on his assessment of the performance of his investments and his desire to align them with his investment goals.

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20.

An equity fund significantly outperformed its benchmark for 3 years and similarly underperformed for 2 years. You can infer that the fund ________.
- A.
  
  Has a different asset mix than the benchmark it is tracking
- B.
  
  Has an incompetent fund manager
- C.
  
  Performs better than its peer group
- D.
  
  Is a bad investment
Correct Answer
A. Has a different asset mix than the benchmark it is tracking

Explanation
Based on the information provided, it can be inferred that the fund has a different asset mix than the benchmark it is tracking. This is because the fund significantly outperformed the benchmark for 3 years and underperformed for 2 years. This pattern suggests that the fund's performance is influenced by factors other than the benchmark, which could be attributed to a different asset mix.

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21.

Which of the following is not likely to increase GDP?
- A.
  
  Raising government revenue by increasing tax rates
- B.
  
  Php300-billion cash injection to the market through bond purchases
- C.
  
  BSP lowering the benchmark interest rate
- D.
  
  Infrastructure projects like the “Build, Build, Build” Program
Correct Answer
A. Raising government revenue by increasing tax rates

Explanation
Raising government revenue by increasing tax rates is not likely to increase GDP because it reduces the disposable income of individuals and businesses, leading to a decrease in consumption and investment. Higher tax rates can discourage economic activity and hinder growth.

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22.

Ricardo plans to buy a house which is worth 2 million in 10 years. He initially invested 60,000 in a mutual fund with a stated interest rate of 7% compounded annually and invests an additional 10,000 monthly. Which scenario needs to happen for him to reach his goal?
- A.
  
  Best-case
- B.
  
  Worst-case
- C.
  
  Base-case
- D.
  
  All cases are correct
Correct Answer
A. Best-case

Explanation
In the best-case scenario, Ricardo's investments in the mutual fund would need to earn a higher interest rate than the stated 7% compounded annually. This would allow his initial investment of 60,000 and the additional monthly investments of 10,000 to grow at a faster rate, potentially reaching the 2 million goal in 10 years.

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23.

The following include tax-advantaged investments in the Philippines, except for:
- A.
  
  Roth Individual Retirement Account
- B.
  
  Personal Equity & Retirement Account
- C.
  
  Personal Equity and Savings Option Fund
- D.
  
  PAG-IBIG MP2 SAVINGS
Correct Answer
A. Roth Individual Retirement Account

Explanation
The Roth Individual Retirement Account is not a tax-advantaged investment in the Philippines. This is because the Roth IRA is a retirement account option available in the United States, not in the Philippines. The other options listed, such as the Personal Equity & Retirement Account, Personal Equity and Savings Option Fund, and PAG-IBIG MP2 Savings, are tax-advantaged investments in the Philippines.

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24.

Given the following information, how much cash are you actually entitled to receive if you own 500 common shares?
- A.
  
  Php450
- B.
  
  Php500
- C.
  
  Php1
- D.
  
  Php25
Correct Answer
A. Php450

Explanation
Based on the given information, the amount of cash that you are entitled to receive if you own 500 common shares is Php450.

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25.

Which of the following companies are part of a fixed basket of common stocks of listed companies, carefully selected to represent the general movement of the Philippine stock market?
- A.
  
  Ayala Land, Inc.
- B.
  
  AllHome Corp.
- C.
  
  Fruitas Holdings Inc.
- D.
  
  The Philippine Stock Exchange, Inc.
Correct Answer
A. Ayala Land, Inc.

Explanation
Ayala Land, Inc. is part of a fixed basket of common stocks of listed companies, carefully selected to represent the general movement of the Philippine stock market. This means that Ayala Land, Inc. is included in a group of stocks that are chosen to provide an overall representation of how the stock market in the Philippines is performing.

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26.

According to experts, an investor should purchase at least ₱8000 worth of stocks in order to minimize fees. The reason for this being,
- A.
  
  Broker’s Commission reaches a minimum percentage of 0.25% of the gross trade amount when the transaction is worth ₱8000 or more
- B.
  
  Broker’s Commission is waived when the transaction is worth at least ₱8000
- C.
  
  Stock Transaction Tax reaches its minimum value when transactions are worth at least ₱8000
- D.
  
  A Transaction worth at least ₱8000 waives the PSE Transaction Fee
Correct Answer
A. Broker’s Commission reaches a minimum percentage of 0.25% of the gross trade amount when the transaction is worth ₱8000 or more

Explanation
When an investor purchases stocks worth at least ₱8000, the broker's commission reaches a minimum percentage of 0.25% of the gross trade amount. This means that the investor will pay a lower commission fee compared to transactions below ₱8000. Therefore, purchasing stocks worth ₱8000 or more helps minimize fees by taking advantage of the lower commission rate.

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27.

Why do actively managed funds charge higher fees compared to passively managed funds?
- A.
  
  Because actively managed funds can beat the index which requires more work and expertise
- B.
  
  Because actively managed funds are guaranteed to have high returns
- C.
  
  Because an investor will never lose money in an actively managed fund
- D.
  
  Because actively managed funds take on lower market risk
Correct Answer
A. Because actively managed funds can beat the index which requires more work and expertise

Explanation
Actively managed funds charge higher fees compared to passively managed funds because they aim to beat the index, which requires more work and expertise. The fund managers of actively managed funds actively make investment decisions and continuously monitor and adjust the portfolio to outperform the market. This involves conducting extensive research, analyzing market trends, and making timely investment decisions. In contrast, passively managed funds simply aim to replicate the performance of a specific index, requiring less active involvement and expertise from the fund managers. Hence, the additional effort and expertise required by actively managed funds justify the higher fees they charge.

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28.

Last March, the Bangko Sentral ng Pilipinas (BSP) conducted policy rate cuts to soften the impact of coronavirus in the Philippines. This will likely _____ market rates and _____ outstanding bonds' prices.
- A.
  
  Increase; increase
- B.
  
  Increase; decrease
- C.
  
  Decrease; increase
- D.
  
  Decrease; decrease
Correct Answer
C. Decrease; increase

Explanation
The correct answer is "Decrease; increase". When the central bank conducts policy rate cuts, it means that they are lowering the interest rates in the economy. This decrease in policy rates will likely lead to a decrease in market rates, as borrowing costs become cheaper. As a result, the prices of outstanding bonds will increase, as their yields become more attractive compared to the lower market rates.

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29.

Which of the following is the best reason why long term bonds usually have higher annual rates than short term bonds?
- A.
  
  Risk of inflation
- B.
  
  Risk of interest rate fluctuations
- C.
  
  Time value of money
- D.
  
  Credit risk
Correct Answer
B. Risk of interest rate fluctuations

Explanation
Long term bonds usually have higher annual rates than short term bonds because they are exposed to the risk of interest rate fluctuations. Interest rates can change over time, and long term bonds are more sensitive to these changes. Investors require a higher return to compensate for the uncertainty and potential loss of value that can occur if interest rates rise. Short term bonds, on the other hand, have less exposure to interest rate fluctuations and therefore offer lower rates.

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30.

A bond whose coupon rate is 5% is currently trading at a market where the rate of bonds with similar risks is 6%. Given these facts, holding other things constant, what will most likely be the price of the bonds in the market?
- A.
  
  Less than face value
- B.
  
  Greater than face value
- C.
  
  Equal to face value
- D.
  
  Cannot be determined
Correct Answer
A. Less than face value

Explanation
The coupon rate of a bond is the interest rate that the bond pays to its holders. When the coupon rate of a bond is lower than the market rate of similar bonds, the bond is less attractive to investors because they can earn a higher return elsewhere. As a result, the price of the bond will decrease in order to compensate for the lower coupon rate. Therefore, the most likely price of the bonds in the market will be less than face value.

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31.

Which of the following about mutual funds is not true?
- A.
  
  It takes at least 1 day before you can withdraw money from a mutual fund
- B.
  
  The amount you can invest in a mutual fund has to be divisible by the minimum investment amount
- C.
  
  Investing in a mutual fund containing stocks A and B, with stock A being more risky, has a lower expected return than investing only in stock A
- D.
  
  Mutual funds benefit greatly from the effects of diversification
Correct Answer
B. The amount you can invest in a mutual fund has to be divisible by the minimum investment amount

Explanation
Mutual funds typically have a minimum investment amount, but it does not have to be divisible by that amount. For example, if the minimum investment amount is $1,000, an investor can invest $2,000 or $5,000 in the mutual fund, as long as it meets the minimum requirement. The amount invested does not need to be a multiple of the minimum investment amount.

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32.

Which of the ff. will a wealthy but highly risk-averse investor be more likely to invest in?
- A.
  
  A portfolio composed of stocks that moves perfectly with the PSEi
- B.
  
  A portfolio composed mostly of bond funds with some equity index funds
- C.
  
  A portfolio composed of bond funds
- D.
  
  A portfolio composed mostly of equity index funds with some bond funds
Correct Answer
B. A portfolio composed mostly of bond funds with some equity index funds

Explanation
A wealthy but highly risk-averse investor would be more likely to invest in a portfolio composed mostly of bond funds with some equity index funds. Bonds are generally considered to be less risky than stocks, making them a more suitable option for risk-averse investors. By including some equity index funds in the portfolio, the investor can still benefit from potential growth in the stock market but with a lower level of risk compared to a portfolio composed mostly of stocks. This combination allows the investor to balance their desire for wealth accumulation with their aversion to risk.

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33.

Which of the ff. best exemplifies the concept of diversification?
- A.
  
  Correlations impact portfolio risk more than individual standard deviations
- B.
  
  Diversification provides lower portfolio standard deviations without affecting returns
- C.
  
  A portfolio with two stocks from the same industry has a lower standard deviation than a portfolio with two stocks from different industries
- D.
  
  Theoretically, all investors should have exactly the same portfolio weights for risky assets
Correct Answer
A. Correlations impact portfolio risk more than individual standard deviations

Explanation
The answer "Correlations impact portfolio risk more than individual standard deviations" best exemplifies the concept of diversification because it highlights the importance of considering the relationship between different assets in a portfolio. Diversification aims to reduce risk by investing in a variety of assets that are not highly correlated, as this can help to offset losses in one asset with gains in another. By focusing on correlations rather than individual standard deviations, investors can effectively manage risk and potentially achieve more stable returns.

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34.

The KIIDS contains the following, except for:
- A.
  
  Rights of participants
- B.
  
  Investment objective
- C.
  
  Portfolio holdings
- D.
  
  Related party transactions
Correct Answer
A. Rights of participants

Explanation
The KIIDS (Key Investor Information Document) is a document that provides essential information about an investment product to potential investors. It typically includes details about the investment objective, portfolio holdings, and related party transactions. However, it does not typically include information about the rights of participants, such as voting rights or redemption rights.

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35.

You have 11 participation units in an equity index fund at the beginning of the year. The NAVpu as of year-end is 111.5, rising from 100 at the beginning of the year. Annual fees include a 0.95% trustee fee, a 0.50% early redemption fee, a custodian fee of 0.04%, and an external auditor fee of 0.01%. As of year-end, the stock market index is at 7,000, rising from 6,250 at the beginning of the year. Your return for this year is:
- A.
  
  11.5%
- B.
  
  10.5%
- C.
  
  12%
- D.
  
  10%
Correct Answer
A. 11.5%

Explanation
The return for this year is 11.5%. This can be calculated by taking the change in the NAVpu from the beginning of the year to the end of the year (11.5 - 100 = 11.5) and dividing it by the initial NAVpu (11.5 / 100 = 0.115). This gives a return of 0.115 or 11.5%. The fees mentioned in the question are not relevant for calculating the return.

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36.

When comparing the effective annual rate of short-term bonds and long-term bonds, the rate of long-term bonds are always ___
- A.
  
  Cannot be determined
- B.
  
  Higher
- C.
  
  Lower
- D.
  
  Equal
Correct Answer
A. Cannot be determined

Explanation
The effective annual rate of short-term bonds and long-term bonds cannot be determined because it depends on various factors such as market conditions, interest rate fluctuations, and the specific terms and conditions of each bond. The rates of short-term and long-term bonds can vary significantly, making it impossible to determine a consistent relationship between the two.

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37.

Which of the following is the best reason for an investor to be concerned with the composition of a portfolio?
- A.
  
  Risk reduction
- B.
  
  Maximizing returns
- C.
  
  Avoidance of investment disasters
- D.
  
  Passing the JFA app process
Correct Answer
A. Risk reduction

Explanation
An investor should be concerned with the composition of a portfolio because it helps in reducing risk. By diversifying investments across different asset classes, sectors, and geographic regions, the investor can minimize the impact of any single investment's poor performance on the overall portfolio. This way, if one investment underperforms, the losses can be offset by the gains from other investments, thus reducing the overall risk.

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38.

If you have a BDO account and have set up online banking, you would still need the following to open a trading account in BDO Nomura:
- A.
  
  Investor Suitability Form
- B.
  
  TIN
- C.
  
  All of the choices are correct
- D.
  
  None of the other choices are correct
Correct Answer
A. Investor Suitability Form

Explanation
To open a trading account in BDO Nomura, having a BDO account and online banking set up is not sufficient. In addition to these requirements, you would also need to fill out an Investor Suitability Form and provide your TIN (Tax Identification Number). This form is necessary to assess your suitability as an investor and ensure compliance with regulatory requirements. Therefore, the correct answer is "Investor Suitability Form."

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39.

A JFA mem asks you how they can invest in foreign markets. You tell them that the following options are available, except for:
- A.
  
  Opening a global account with BDO Nomura
- B.
  
  Buying mutual funds that focus on international investments
- C.
  
  Investing in multinational corporations
- D.
  
  All of the choices are correct
Correct Answer
A. Opening a global account with BDO Nomura

Explanation
The correct answer is "Opening a global account with BDO Nomura." This option is not available for investing in foreign markets. The other options mentioned, such as buying mutual funds that focus on international investments and investing in multinational corporations, are all valid ways to invest in foreign markets.

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40.

Vivi is a recently employed graduate with total net current assets of Php8,000 after deducting this month’s expenses (total current assets are assets that can be converted to cash quickly and typically include cash and marketable securities). What would you recommend she use this Php8,000 for?
- A.
  
  Emergency fund
- B.
  
  Stocks
- C.
  
  New shoes
- D.
  
  Balanced funds
Correct Answer
A. Emergency fund

Explanation
It is recommended for Vivi to use the Php8,000 for an emergency fund. An emergency fund is a financial safety net that helps individuals cover unexpected expenses or financial emergencies. As a recently employed graduate, having an emergency fund is crucial to protect against unforeseen circumstances such as medical emergencies, job loss, or car repairs. By setting aside this amount for emergencies, Vivi can have peace of mind knowing that she has a financial cushion to fall back on when needed.

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41.

When forecasting the future returns of a stock investment, it is always best to use:
- A.
  
  The average historical return
- B.
  
  An analyst's forecast
- C.
  
  Intuition
- D.
  
  Cannot be determined
Correct Answer
D. Cannot be determined

Explanation
The future returns of a stock investment cannot be determined with certainty. There are various factors that can affect the performance of a stock, such as market conditions, economic factors, company performance, and investor sentiment. While historical returns and analyst forecasts can provide some insights, they are not definitive indicators of future performance. Additionally, relying solely on intuition is not a reliable approach for forecasting stock returns. Therefore, it is not possible to determine the future returns of a stock investment.

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42.

Lucas is a risk-neutral investor. What portfolio mix would you recommend to him? Assume that leveraged portfolios are not allowed.
- A.
  
  Point B
- B.
  
  Point A
- C.
  
  Point M
- D.
  
  Point Z
Correct Answer
A. Point B

Explanation
Based on the information provided, the recommended portfolio mix for Lucas, a risk-neutral investor, would be Point B. This suggests that Lucas should have a balanced portfolio with an equal mix of risk and return. Point B is considered the optimal point for a risk-neutral investor as it offers a moderate level of risk and potential returns.

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43.

Where can you not buy investments?
- A.
  
  Bubble
- B.
  
  GCash
- C.
  
  COL
- D.
  
  Seedbox
Correct Answer
A. Bubble

Explanation
Bubble is a platform that allows users to buy and sell various types of investments such as stocks, cryptocurrencies, and collectibles. Therefore, it is incorrect to say that you cannot buy investments on Bubble.

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44.

You have a bond maturing in two years with a face value of Php 100,000 and a stated interest rate of 4%. Interest is paid quarterly on March 31, June 30, September 30, and December 31. On September 30, the gross cash you receive from interest payments is ___
- A.
  
  Php1,000
- B.
  
  Php4,000
- C.
  
  Php12,000
- D.
  
  Php100,000
Correct Answer
A. Php1,000

Explanation
The bond has a stated interest rate of 4%, which means that the bond pays interest of 4% of its face value annually. Since interest is paid quarterly, each interest payment would be 1/4th of the annual interest payment. Therefore, the gross cash received from interest payments on September 30 would be 1/4th of the annual interest payment, which is 1/4 * 4% * Php100,000 = Php1,000.

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45.

To open a COL account online, you would need:
- A.
  
  A blank paper where you will write your signature thrice
- B.
  
  TIN
- C.
  
  All of the choices are correct
- D.
  
  None of the other choices are correct
Correct Answer
A. A blank paper where you will write your signature thrice

Explanation
To open a COL account online, you would need a blank paper where you will write your signature thrice. This is because a signature is required as a form of verification and authentication when opening an account. By signing the paper three times, it ensures that the signature is consistent and can be used for future reference. The other options, TIN (Tax Identification Number) and "All of the choices are correct" do not accurately describe the specific requirement of a blank paper with three signatures.

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46.

Kate is a well-paid doctor that wants to invest a total of Php79 in fixed-income investments. Given the following investment options, where should she invest it in?
- A.
  
  ATRAM Peso Money Market Fund
- B.
  
  BPI savings account
- C.
  
  Retail treasury bonds
- D.
  
  Petron Series A Bonds
Correct Answer
A. ATRAM Peso Money Market Fund

Explanation
Kate should invest her Php79 in the ATRAM Peso Money Market Fund. This investment option is a type of fixed-income investment that offers relatively low risk and stable returns. It is a mutual fund that invests in short-term fixed-income securities such as government bonds and high-quality corporate bonds. This option would be suitable for Kate as a well-paid doctor looking for a secure investment with potential for growth.

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47.

Assuming that prices are not sticky and that person A’s salary and expenses increases at exactly the same rate as inflation, what will happen to the peso amount of person A’s savings next year as compared to this year’s?
- A.
  
  It will increase
- B.
  
  It will decrease
- C.
  
  It will stay the same
- D.
  
  Cannot be determined
Correct Answer
A. It will increase

Explanation
Assuming that prices are not sticky and that person A's salary and expenses increase at exactly the same rate as inflation, it can be inferred that the purchasing power of person A's savings will remain constant. As inflation increases, the value of money decreases, which means that the same amount of money will be able to buy less goods and services in the future. However, since person A's salary and expenses also increase at the same rate as inflation, their savings will also increase proportionally, maintaining the same purchasing power. Therefore, the peso amount of person A's savings will increase next year compared to this year's.

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48.

Reden is willing to take high risks in exchange for high returns. Which among these investments options show an increasing order of expected returns?
- A.
  
  None of the other choices are correct
- B.
  
  Balanced Fund, Bond Fund, Equity Fund
- C.
  
  Bond Fund, Equity Fund, Balanced Fund
- D.
  
  Balanced Fund, Equity Fund, Dividend Fund
Correct Answer
A. None of the other choices are correct
49.

T-bills are typically issued in ____ maturities.
- A.
  
  ≤1 year
- B.
  
  2-5 years
- C.
  
  6-10 years
- D.
  
  11-30 years
Correct Answer
A. ≤1 year

Explanation
T-bills, also known as Treasury bills, are short-term debt instruments issued by the government to finance its operations and manage cash flow. They are typically issued with maturities of less than or equal to 1 year. This means that the government will repay the principal amount to the investor within a year from the date of issuance. T-bills are considered to be low-risk investments as they are backed by the full faith and credit of the government. Investors often use T-bills as a safe haven for their short-term cash holdings or as a means to earn a guaranteed return in a short period of time.

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50.

All else kept constant, the higher the price of a fixed-income investment, the ___ the yield.
- A.
  
  Longer
- B.
  
  Lower
- C.
  
  Shorter
- D.
  
  Higher
Correct Answer
B. Lower

Explanation
This is because the yield of a fixed-income investment is inversely related to its price. When the price of the investment is higher, the yield will be lower. Conversely, when the price is lower, the yield will be higher. This relationship exists because as the price of the investment increases, the fixed interest payments received from the investment become a smaller percentage of the price, resulting in a lower yield.

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[kazoku 6] Upjfa Finance Academy 52.2 Final Exam

April is a working student who earns ₱15,000 monthly. As a quick and simple rule of thumb, how much money would you recommend for her to allocate for her savings, needs, and wants respectively?

If you are 18 right now, what is the best age for you to begin investing?

Which of the following choices can be considered as something attributable more to an investor’s risk tolerance rather than their risk capacity?

Alexa is a 58-year old mother who has been investing for over 20 years now. She wants to be able to save enough money to buy a house before she retires in 2 years time. Which among the following are factors used to estimate Alexa’s risk capacity?

Which of the following best exemplifies a want expense?

Andrea’s financial goal for her investments is capital preservation. Given this, what investment should she have mainly purchased?

The price of a fried chicken meal is Php50 in 2020 and Php55 in 2021. Assuming that this meal is the only thing people buy, what is the inflation rate from 2020 to 2021?

Php1,000.00 is placed in a savings account compounded semiannually with a stated annual rate of 2%. Its value one year from now and two years from now, respectively, is:

Php1,000.00 is placed in a savings account compounded semiannually with an effective annual rate of 2%. Its value one year from now and two years from now, respectively, is:

The following statements pertain to basic concepts in asset allocation and investments. Identify which among the following is true:

Mr. Rivera, a foreign investor, uses an investment strategy where he divides up the total amount to be invested across periodic purchases of a target asset. What is the main purpose of this strategy?

Mykie is planning to buy stocks through Philstocks. If she is planning to earn solely through capital gains, how much should a stock’s price increase for her to break-even?

Given the following candlestick chart, which day did the stock’s price open at 112, closed at 114, had the highest price at 115, and lowest at 111?

Ms. Rona recently started investing in stocks for the long term. However, she saw drastic changes in the prices of her investments. Which of the following would be a good reason to sell?

Ruben started investing 5 years ago and had a moderate investor’s profile. Upon reviewing the performance of his investments, he decided to rebalance his portfolio. Which of the following is a good reason behind this decision?

An equity fund significantly outperformed its benchmark for 3 years and similarly underperformed for 2 years. You can infer that the fund ________.

Which of the following is not likely to increase GDP?

Ricardo plans to buy a house which is worth 2 million in 10 years. He initially invested 60,000 in a mutual fund with a stated interest rate of 7% compounded annually and invests an additional 10,000 monthly. Which scenario needs to happen for him to reach his goal?

The following include tax-advantaged investments in the Philippines, except for:

Given the following information, how much cash are you actually entitled to receive if you own 500 common shares?

Which of the following companies are part of a fixed basket of common stocks of listed companies, carefully selected to represent the general movement of the Philippine stock market?

According to experts, an investor should purchase at least ₱8000 worth of stocks in order to minimize fees. The reason for this being,

Why do actively managed funds charge higher fees compared to passively managed funds?

Last March, the Bangko Sentral ng Pilipinas (BSP) conducted policy rate cuts to soften the impact of coronavirus in the Philippines. This will likely _____ market rates and _____ outstanding bonds' prices.

Which of the following is the best reason why long term bonds usually have higher annual rates than short term bonds?

A bond whose coupon rate is 5% is currently trading at a market where the rate of bonds with similar risks is 6%. Given these facts, holding other things constant, what will most likely be the price of the bonds in the market?

Which of the following about mutual funds is not true?

Which of the ff. will a wealthy but highly risk-averse investor be more likely to invest in?

Which of the ff. best exemplifies the concept of diversification?

The KIIDS contains the following, except for:

When comparing the effective annual rate of short-term bonds and long-term bonds, the rate of long-term bonds are always ___

Which of the following is the best reason for an investor to be concerned with the composition of a portfolio?

If you have a BDO account and have set up online banking, you would still need the following to open a trading account in BDO Nomura:

A JFA mem asks you how they can invest in foreign markets. You tell them that the following options are available, except for:

Vivi is a recently employed graduate with total net current assets of Php8,000 after deducting this month’s expenses (total current assets are assets that can be converted to cash quickly and typically include cash and marketable securities). What would you recommend she use this Php8,000 for?

When forecasting the future returns of a stock investment, it is always best to use:

Lucas is a risk-neutral investor. What portfolio mix would you recommend to him? Assume that leveraged portfolios are not allowed.

Where can you not buy investments?

You have a bond maturing in two years with a face value of Php 100,000 and a stated interest rate of 4%. Interest is paid quarterly on March 31, June 30, September 30, and December 31. On September 30, the gross cash you receive from interest payments is ___

To open a COL account online, you would need:

Kate is a well-paid doctor that wants to invest a total of Php79 in fixed-income investments. Given the following investment options, where should she invest it in?

Assuming that prices are not sticky and that person A’s salary and expenses increases at exactly the same rate as inflation, what will happen to the peso amount of person A’s savings next year as compared to this year’s?

Reden is willing to take high risks in exchange for high returns. Which among these investments options show an increasing order of expected returns?

T-bills are typically issued in ____ maturities.

All else kept constant, the higher the price of a fixed-income investment, the ___ the yield.

Last March, the Bangko Sentral ng Pilipinas (BSP) conducted policy rate cuts to soften the impact of coronavirus in the Philippines. This will likely _ market rates and _ outstanding bonds' prices.