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WorksheetsIRM-Chapter 1 and 2
Total questions: 45
Worksheet time: 1hrs 1mins
Name
Class
Date
1.
Individuals invest because an investment has the guarantee to preserve or increase value and to earn income.
a)
true
b)
false
2.
Buying one share of BDO Growth Mutual Fund is a Direct Investment where you are in effect buying a portion of a portfolio of securities owned by the fund. Thus, you will have a claim on a fraction of an entire portfolio of securities.
a)
true
b)
false
3.
Futures are derivative securities that allow an investor to sell or buy another security or asset at a specific price over a given time period.
a)
true
b)
false
4.
In investment risk, the broader the range of possible values (dispersion), the greater is the risk of the investment.
a)
true
b)
false
5.
High-risk investments are those considered safe with respect to the return of funds invested and the receipt of a positive rate of return.
a)
true
b)
false
6.
The safest money market funds are those that invest solely in government securities and are virtually default-risk-free.
a)
true
b)
false
7.
With stocks in general, you can never be sure that, when funds are needed, you can quickly sell the stock without taking a loss.
a)
true
b)
false
8.
Purchasing power risk for short-term investments occurs when the rate of return on these investment falls short of the inflation rate.
a)
true
b)
false
9.
Growth-oriented and speculative stocks tend to do especially well in an expanding economy.
a)
true
b)
false
10.
Stocks and equity-related securities (such as mutual funds and convertibles) are highly responsive to the economic cycle. During recovery and expansion, stock prices are down. As the decline approaches, stock prices begin to rise as well.
a)
true
b)
false
11.
It is made up of income earned on the job as well as most other forms of noninvestment income.
a)
Active Income
b)
Passive Income
12.
A special category that consists of income derived chiefly from real estate, limited partnerships, and other forms of tax shelters.
a)
Active Income
b)
Passive Income
13.
Which of the following is not a common investment goal?
a)
Enhancing current income
b)
Saving for major expenditures
c)
Accumulate retirement funds
d)
Sheltering income from taxes
e)
Saving for further investment speculation
14.
Money market mutual fund is a mutual fund that solely invests in short-term investment vehicles.
a)
true
b)
false
15.
Which of the following statement is false?
a)
Similar to mutual funds, hedge funds pool the investors’ funds to invest in securities but are open to a narrower group of investor than mutual funds and may employ high-risk strategies.
b)
Options represent contractual arrangements in which a seller will deliver or a buyer will take delivery of a specified quantity of a commodity at a given price by a certain date.
16.
Investment that are considered safe with respect to the return of funds invested and the receipt of a positive rate of return.
a)
High-Risk Investments
b)
Low-Risk Investments
c)
Direct Investments
d)
Foreign Investments
17.
Both direct and indirect foreign investments provide investors more attractive returns or lower-risk investments compared to purely domestic investments.
a)
true
b)
false
18.
An investment in equity represents funds loaned in exchange for the receipt of interest income an repayment of the loan at a given future date.
a)
true
b)
false
19.
Generally, these investors tend to be more sophisticated because they handle much larger amounts of money, and they tend to have a broader knowledge of the investment process and available investment techniques and vehicles.
a)
Institutional investors
b)
Individual investors
c)
Bondholders
d)
Equity holders
20.
Administers and oversees the PERA of the contributor. Provides regular updates on the status of the account/s.
a)
Contributor
b)
Investment Manager
c)
Custodian
d)
Administrator
21.
It is an entity accredited by the concerned Regulatory Authority to invest on behalf of the Contributor. They are not allowed to recommend or sell to you its own investment products or that of its subsidiaries or affiliates.
a)
Contributor
b)
Investment Manager
c)
Custodian
d)
Administrator
22.
How much is the maximum aggregate annual contribution for an individual?
a)
P 100,000
b)
P 200,000
c)
P 500,000
d)
P 1,000,000
23.
In the account opening for PERA, the client will be asked to identify your investment objectives and your risk tolerance through a Pre-Acceptance and General Risk Disclosure Statement.
a)
true
b)
false
24.
In the account opening for PERA, the client will be provided with a Client Suitability Assessment (CSA) that contains provisions on the general risks associated with each category of PERA Investment Product and cautionary statement on the aforementioned risks.
a)
true
b)
false
25.
In the account opening for PERA, the client will be informed of the investment options/ products according to their category and your risk profile classification.
a)
true
b)
false
26.
Bear market is a favorable market normally associated with rising prices, investor optimism, economic recovery, and governmental stimulus while bull markets are associated with falling prices, investor pessimism, economic downturn, and government restraint.
a)
true
b)
false
27.
(1) When an investor purchases a security in the hope that it will increase in value and can be sold later for a profit, the investor is making a short selling. (2) When a margin account has more equity than is required by the initial margin, an investor can use this “paper” equity to purchase more securities.
a)
(1) False (2) True
b)
(1) False (2) False
c)
(1) True (2) True
d)
(1) True (2) False
28.
If the value of the investor’s account drops below this initial margin requirement, the investor will have a Margin Call while if the value of the account drops below the maintenance margin, the investor have a Restricted Account.
a)
true
b)
false
29.
Short sales are regulated by the SEC and can be executed only after a transaction where the price of the security rises; in other words, short sales are feasible only when there is an uptick.
a)
true
b)
false
30.
Which of the following is true regarding short selling?
a)
Short seller margins decline if the share price rises because some of the deposit (plus the initial proceeds) will be necessary to buy back the shares.
b)
Short sales can earn speculative profits because the investor is betting against the market, which involves considerable risk exposure.
c)
If the market moves up instead of down, the investor could lose all (or more) of the short sale proceeds and margin.
d)
All statements are true.
31.
It involves the purchase of the security issue from the issuing firm at an agreed-on price and bearing the risk of reselling it to the public at a profit.
a)
Initial public offering
b)
Underwriting
c)
Investment banking
d)
Private placement
32.
The “bid” price is the highest price offered by the dealer to purchase a security; the “ask” price is the lowest price at which the dealer is willing to sell the security.
a)
true
b)
false
33.
An American Depositary Shares (ADR) is a negotiable security that represents securities of a foreign company and allows that company’s shares to trade in the US financial markets. It represents an easy, liquid way for US investors to own foreign stocks.
a)
true
b)
false
34.
Which of the following risks may affect your foreign investments?
a)
Currency exchange risk
b)
Political risk
c)
Inflationary risk
d)
Default risk
e)
All of the above
35.
Which of the following is false regarding margin trading?
a)
In margin trading, investors can use margin to reduce their money and use borrowed money to make a long purchase.
b)
Once the investment increases in value, the investor will pay off the loan (with fixed interest charges) and keep the rest as profits.
c)
Buying on margin is quite risky, as the investors can lose their whole capital if the investment decreases in value.
d)
All statements are true.
36.
Companies to disclose all information relevant to new security issues. The company must file a registration statement with the Securities and Exchange Commission (SEC) giving required and accurate information about the new issue.
a)
true
b)
false
37.
"Insider Trading" occurs when an "insider" buys or sells a security of the issuer while in the possession of material information that is not accessible to the public and said information pertains to the issuer or its securities.
a)
true
b)
false
38.
If interest rates are expected to decline, bond prices would fall, and bonds would be a good place to hold investment funds. Interest rates decline during normal recovery and rise during economic declines.
a)
true
b)
false
39.
Fast food chains and grocery stores—firms that supply basic consumer necessities are considered cyclical companies. While auto industry can be considered as defensive companies.
a)
true
b)
false
40.
Which of the following is false regarding stocks as a leading economic indicator?
a)
Changes in stock prices normally occur before the actual forecasted changes become apparent in the economy.
b)
The current trend of stock prices is frequently used to help predict the course of the economy itself.
c)
An indicator can be any statistic that is used to predict and understand financial or economic trends.
d)
All statements are true.
41.
Thomas Barrow purchased a stock one year ago at a price of P 32 a share. In the past year, she has received four quarterly dividends of P 0.75 each. Today she sold the stock for P 38 a share. Her capital gain per share is
a)
P 3.00.
b)
P 6.00.
c)
P (6.00).
d)
P 9.00.
42.
Assume that an investor buys 50 shares of stock at P 45 per share, putting up a 70% margin. If the stock rises to P 65 per share, what is the investor’s new margin position?
a)
0.7
b)
0.79
c)
0.3
d)
0.21
43.
Mr. Carson bought 100 shares of stock at P 80 per share using an initial margin of 60%. Given a maintenance margin of 25%, how far does the stock have to drop before Jerri faces a margin call? (Assume that there are no other securities in the margin account.)
a)
P 32.00
b)
P 48.00
c)
P 42.67
d)
P 128.00
44.
The current exchange rate between the U.S. dollar and the Japanese yen is 80 (yen/$). How many dollars would you get for 1,000 Japanese yen?
a)
$ 12.50
b)
$ 0.08
c)
$ 12,500
d)
None of the choices
45.
Mary Grantham purchased 1,000 Apple (APPL) stock one year ago at a price of P 32 per share. During the year, she has received dividends of P 0.75 per share. Today she sold 1/4 of her stock investment for P 38 a share. How much would be her paper gains and her realized return from her stock investment?
a)
Paper Gain: P 2,250 & Total return: P 4,500
b)
Paper Gain: P 4,500 & Total return: P 2,250
c)
Paper Gain: P 5,250 & Total return: P 1,500
d)
Paper Gain: P 1,500 & Total return: P 4,500
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