chapter 6

Question 1

what is PSEi

Answer 1

philippine stock exchange index

Question 2

six sectors indices

Answer 2

financials
industrials
holding firms
property
services
mining and oil

Question 3

_______ means that individuals maximize returns for a given level of risk or minimize risk if the returns are the same

Answer 3

risk aversion

Question 4

______ is defined here as the uncertainty of returns. this definition encompasses the possibility of both gains and losses

Answer 4

risk

Question 5

brown and Reilly identified the major sources of risk

Answer 5

business risk
financial risk
liquidity risk
exchange rate risk
country risk

Question 6

related to the nature of the company’s products and its operating strategy

Answer 6

business risk

Question 7

refers to the risk created by the choice of capital structure, the financing mix of the issuing company

Answer 7

financial risk

Question 8

uncertainty that an investment can be converted to cash at a known price

Answer 8

liquidity risk

Question 9

investment is denominated in another currency

Answer 9

exchange rate risk

Question 10

political and economic uncertainty of a particular business environment

Answer 10

country risk

Question 11

the major deposit instruments

Answer 11

savings account
checking account
time deposit account

Question 12

provides a low fixed rate of return but provides the convenience of availability

Answer 12

typical savings account

Question 13

requires a minimum amount of deposit with a fixed term to maturity

Answer 13

time deposit

Question 14

CAMELS rating system is based on the following components

Answer 14

capital adequacy
asset quality

Question 15

the national government through the bureau of treasury issues a debt securities know as _________ and __________

Answer 15

treasury bills T-bills
treasury bonds T-bonds

Question 16

_________ have maturities of one year or less

Answer 16

treasury bills

Question 17

_________ and ______ have maturities longer than one year which could be from 2 to 25 years

Answer 17

treasury notes
bonds

Question 18

what is GSED

Answer 18

government securities eligible dealers

Question 19

what is PDEx

Answer 19

philippine dealing and exchange corporation

Question 20

what is LGU

Answer 20

local government unit

Question 21

_______ are short term instruments issued by a corporation for their immediate needs.

Answer 21

commercial papers

Question 22

_______ are long term debt instruments issued by corporation

Answer 22

corporate bonds

Question 23

______ are financial instruments that represent ownership in a corporation

Answer 23

stocks

Question 24

equity securities are classified under two main category

Answer 24

common stocks
preferred stocks