QUIZ 1 TRUE OR FALSE

1. Priority in dividend payment is given to preferred stocks over common stock. – TRUE
2. A lender is interested in the valuation of the loan and also the collateral attached to the obligation. – TRUE
3. Preferred stocks are equity securities that are considered variable income securities. – FALSE
4. A redeemable bond is one where the issuer has the right to redeem the bonds even before maturity. – FALSE
5. If the cash flow will be paid in series of annual maturities with the first payment due immediately, the relevant
present value factor for discounting the cash flows is the present value of an annuity due. – TRUE
6. Simply put, in derivative market, investors bet on the price of a particular variable such as price of commodity,
foreign exchange rate, and interest rate, among others. – TRUE
7. Present value is the equivalent amount that will be received after a certain period including all the implied
interest therein. – TRUE
8. Valuation of liabilities enables the firm to know the value of what it owes. – TRUE
9. OTC markets are decentralized markets with physical location. – FALSE
10. Debt securities are generally variable income securities. – FALSE
11. A callable bond is one where the investor or holder of the bond has the right to demand payment even before
maturity. – FALSE
12. Participating feature of preference shares allows the shareholders to receive dividends in arrears. – FALSE
13. A hybrid security is one where the holder has an option to convert the security into cash even before maturity. –
FALSE
14. The difference between holders of equity securities and holders of debt securities is that the former is not
entitled to a regular payment. – TRUE
15. Electronic Communications Networks (ECNs) are automated stock trading systems that are integrated within the
stock exchanges. – FALSE
16. Redeemable preference shares are presented in the statement of financial position as a financial liability. – TRUE
17. Theoretically, the value of present value of an ordinary annuity of 1 factor is always greater than one regardless
of the number of periods and the interest rate. – FALSE
18. Hybrid securities include convertible and callable debt and equity securities. – FALSE
19. The bond market is a virtual network consisting primarily of dealers. – TRUE
20. Capital market is one where long-term debt securities or equity securities may be issued. – FALSE

QUIZ 2 MCQ
1. A capital market does not include
none of the foregoing
bond market
money market
stock market
2. The Philippines
has physical exchange only
has neither physical exchange nor electronic exchange
has electronic exchange
has both physical exchange and electronic exchange
3. Which is an example of a hybrid security?
Convertible preferred stock
Redeemable bond
Cumulative preferred stock
Callable bond
4. Supplemental liquidity providers, choose the incorrect one
Introduced to the New York Stock Exchange
Initially a pilot program intended to last for 6 months but it has been renewed multiple times
Uses both manual floor brokers and computerized trading to create high volumes of trading on the
exchange.
Not located on the trading floor
5. This term is a substitute for investment management
mergers and acquisition
portfolio management
financial management
transaction appraisal
6. Enables a trader to switch to a variable interest rate loan from a fixed interest rate loan, or vice versa.
Fixed interest futures contract
Interest option contract
Interest rate swap
variable interest forward contract
7. A bond that is collateralized by a real property is an example of
Collateral trust bond
Subordinated bond
Mortgage bond
Debenture bond
8. Which of the following statements does not pertain to money market
, the money market is a dealer market, with dealer firms buying and selling securities in their own accounts
and making money on the spread when they sell them.
Individual investors can gain access to the money market through money market mutual funds.
Money market instruments are usually traded in low to high denominations
Money market instruments are short-term borrowings by governments, financial institutions, and large
corporations.
9. Valuation of net assets in a business combination is a most likely a concern of
Tax planning
Portfolio Management
Mergers and Acquisition
Litigation
10. Electronic Communication Network
It operates both manually and electronically, managing a physical auction and providing algorithmic
(computerized) quotes to the automated auction.
Does not utilize market makers but simply match buy and sell orders that have the same prices for
the same number of shares.
An electronic stock exchange without a physical location.
Is an exchange member organization that is assigned a group of listed securities and uses computerized
trading .
11. In general, it is a firm (or an individual) that holds securities in its own inventory and posts both bid and offer
prices on them.
market maket
physical exchange
supplemental liquidity provider
floor broker
12. Transaction appraisal least likely includes which of the following?
economic damages computations
leveraged buy-outs
going public or going private
acquisitions and mergers
13. The investor has the right to demand payment from his bond investment before maturity. This is an example of
Callable bond
Subordinated bond
Convertible bond
Redeemable bond
14. Value can be defined as
All of the foregoing
Utility of a thing
Purchasing power
The amount for which a thing can be exchanged in the market
15. The issuer of the bonds pay 10% interest when the net profit of the company reaches P100 million and only pays
5% when the net profit falls below the targeted profit. This is an example of
Floating rate bond
Income bond
Subordinated bond
Debenture bond
16. Present value of 1 is used when the cash flow is in
equal installments to be received at the beginning of each period.
equal installments to be received at the end of each period
lump sum amount to be received after a number of years.
lump sum amount to be received immediately
17. Present value of an annuity due of 1 is relevant for cash flow to be received
at the beginning of the five year maturity
in annual installments for five years with the first payment to be received at the end of the first year
at the end of the five year maturity period
in annual installments for five years with the first payment due immediately
18. Present value of an ordinary annuity is used when the cash flow is in
lump sum amount to be received after a number of years.
equal installments to be received at the beginning of each period.
equal installments to be received at the end of each period.
lump sum amount to be received immediately
 19. Business Valuation is the process of determining the
accounting value of a business
economic value of a firm
monetary value of an entity
replacement value of a company
20. Which of the following can be a security in a collateral trust bond?
Inventories
None of the foregoing
Shares in another company
Real property

QUIZ 6 THEORIES:
1. Consider the following statements:
1) The summation of the possible returns divided by their corresponding probabilities equals the expected
return of a portfolio.
2) Weights and probabilities are irrelevant in the computation of arithmetic average and geometric average of
the rate of return of an individual security.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
2. Consider the following statements:
1) Total return consists of two types of return, first is from income distribution to equity holders and second is
through interest payments to debt holders.
2) Total return can be used in the calculation of the rate of return for either fixed-income securities or variable-
income securities.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
3. Consider the following statements:
1) Bonds issued at a premium have higher current yield than those issued at a discount, assuming all other
things being equal.
2) Bonds issued at a discount have lower yield to maturity than those issued at a premium, assuming all other
things being equal.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
4. Consider the following statements:
1) Geometric mean is more appropriate than arithmetic mean when averaging the returns of a security that is
being held for a long period of time.
2) Geometric mean formula uses the nth root of the product which is equals to the number raised to the power
of n/1.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
5. Consider the following statements:
1) If the beta coefficient is equals to 1 then the expected return through CAPM is basically equals to the market
rate of return.
2) If the beta coefficient in CAPM is greater than 1 then the security is more volatile than the market.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
6. Consider the following statements:
1) Coefficient of variation is better than standard deviation in ranking the desirability of investment options
because the former accounts for both the risk and return of the investment.
2) Average rate of return divided by the standard deviation produces coefficient of variation.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
7. Consider the following statements:
1) The greater the difference between the individual rate of return and the computed mean of the rates of
return, the higher will be the variance.
2) The higher the variance, the higher the standard deviation.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
8. Consider the following statements:
1) If you are calculating the variance of a stocks that has been held for 20 years, and the you included ten years
of data, it is more appropriate to use the population variance.
2) If the variance is less than one, then the value of standard deviation will be lower than the value of the
variance.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
9. Consider the following statements:
1) Unsystematic risks are considered undiversifiable risk, such that investing in various securities in different
industries and markets will not mitigate the associated risk .
2) Systematic risks includes the risks associated with macroeconomic factors.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
10. Consider the following statements:
1) Variance and standard deviation are used as indicators of market volatility and risk.
2) Variance and standard deviation both measure how far from the mean is a set of returns in a given time
horizon.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
11. Consider the following statements:
1) The square root of the standard deviation is equal to the variance of a particular security.
2) The denominator in the sample variance formula is the number of instances in the sample less one.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
12. Consider the following statements:
1) Total return or total yield of stocks is also equal to dividend payout ratio plus capital gains yield
2) Total return or total yield of equity securities comes from income distribution as dividends and interest.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
13. Consider the following statements:
1) Diversifying the portfolio contents virtually eliminates the unsystematic risk accompanying a particular
security.
2) Management of systematic risk is deemed more difficult than its unsystematic risk counterpart.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
14. Consider the following statements:
1) The denominator base of yield to maturity is the average of face value and par value of the bonds.
2) Yield to maturity formula uses the annual interest payment and the annualized discount or premium as the
numerator.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
15. Consider the following statements:
1) Estimated internal rate of return of a fixed-income security can be calculated using current yield or yield to
maturity.
2) Current yield and yield to maturity is the expected rate of return for a fixed-income security that will be held
by the investor until maturity.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
16. Consider the following statements:
1) Expected return may use probability distribution of possible returns.
2) The weights that may be used in calculating the expected return of the portfolio are the probabilities of
earning a series of returns and the par or stated values of the investments.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
17. Consider the following statements:
1) If beta coefficient is equals to 2, then the stock price of a particular security will double when there is a 50%
overall decline in the stock market.
2) If beta coefficient is equals to 0.50 and the market experience a 40% upward trend in stock prices, then the
price of a particular security will rise by 20%.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
18. Consider the following statements:
1) Liquidity risk is an example of systematic risk.
2) Interest risk is an example of unsystematic risk
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
19. Consider the following statements:
1) Localized demographic hazard on a particular industry or sector is related to unsystematic risk.
2) Legal and political uncertainty on a national level is related to systematic risk for a portfolio consisting of
purely domestic securities.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
20. Consider the following statements:
1) Coefficient of variation accounts for both the risk and the return on investment.
2) Higher coefficient of variation is more favorable to the investor in security.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
21. Consider the following statements:
1) Low level of uncertainty is associated with low level of return.
2) Risk-return tradeoff presupposes that the potential return rises with an escalation in risk.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
22. Consider the following statements:
1) The best source of risk-free interest rate is the government issued debt securities.
2) Risk premium in the CAPM diagram is the distance between the market rate and the risk-free rate.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
23. Consider the following statements:
1) Bonds issued at a discount is an additional income to bondholders
2) Bonds issued at a premium will decrease the yield to maturity.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
24. Consider the following statements:
1) The higher the average return of a security, the higher the coefficient of variation.
2) The higher the standard deviation, the lower the coefficient of variation.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
25. Consider the following statements:
1) Bond discount or premium is taken into account when calculating yield to maturity.
2) Yield to maturity assumes that the bond is held by the investor for at least one year.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
26. Consider the following statements:
1) Par value and current market price are relevant in the computation of both current yield and yield to
maturity.
2) Coupon payment is included in the calculation of both current yield and yield to maturity.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
27. Consider the following statements:
1) Compounding effect of interest is not taken into account when using arithmetic mean in calculating average
return.
2) Both arithmetic mean and geometric mean can be used when there is a negative return or loss on
investment.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
28. Consider the following statements:
1) Systematic risk is beyond the control of the organization.
2) Unsystematic risk is unavoidable risk that will affect the entire market.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
29. Consider the following statements:
1) Beta risk included in the calculation of rate of return through CAPM pertains to the unsystematic risk that
remains after diversification.
2) The risk free rate used in the calculation of expected return through CAPM is based on low-risk debt securities
issued by the publicly listed entities.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct
30. Consider the following statements:
1) Assigning weights based on the market value of the security can be used in calculating the average return on
an individual class of security.
2) Geometric average is used when computing the average return of individual security and the entire portfolio.
Both statements are correct
Only statement 1 is correct
Both statements are incorrect
Only statement 2 is correct