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2-22. BA-FM 24P(2018)-A (LEC) Banking and Financial Institution > Chapter 6: Investment Companies & Pension Funds > Flashcards

Chapter 6: Investment Companies & Pension Funds Flashcards

1
Q

Financial intermediaries that collect funds from individual investors and invest those funds in a potentially wide range of securities or other assets

A

Investment Companies

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2
Q

IMPORTANCE OF INVESTMENT COMPANIES

A

1.Access to Diversified Portfolios
2.Professional Management
3.Liquidity and Flexibility
4.Economic Growth and Capital Formation
5.Financial Inclusion
6.Stimulating Market Capitals

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3
Q

Types of Investment Companies

A
  1. Mutual Funds
  2. Exchange Traded Funds
  3. Unit Investment Trust
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4
Q

a managed fund that pools money from shareholders to invest in securities

A

Mutual Funds

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5
Q

the fund’s performance depends on how its collective assets are doing

A

Mutual Funds

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6
Q

a type of pooled investment security that can be bought and sold much like an individual stock

A

EXCHANGE-TRADED FUNDS

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7
Q

_________ share prices fluctuate all day as the ______ is bought and sold

A

EXCHANGE-TRADED FUNDS

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8
Q

offers a fixed portfolio as redeemable units to investors for a specific period of time

A

UNIT INVESTMENT TRUSTS

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9
Q

it is designed to provide capital appreciation and/or dividend income

A

UNIT INVESTMENT TRUSTS

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10
Q

are passive investments

A

UNIT INVESTMENT TRUSTS

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11
Q

is a large pool of money that’s specifically used to invest contributions made towards retirement benefits.

A

Pension Funds

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12
Q

are financial arrangements established by employers or governments to provide retirement benefits to employees.

A

Pension Plans

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13
Q

TYPES OF PENSION FUNDS METHODS

A
  1. Social Security System (SSS)
  2. Government Service Insurance System (GSIS)
  3. Personal Equity and Retirement Account (PERA)
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14
Q

is a mandatory ________________________ in the Philippines for Filipino workers in the private sector, self-employed individuals, and some overseas Filipino workers.

A

The Social Security System (SSS)

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15
Q

is a social security program specifically designed for Filipino government employees, including national government agencies, local government units, and government-owned and controlled corporations (GOCCs).

A

The Government Service Insurance System (GSIS)

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16
Q

provide eligible employees with guaranteed income for life when they retire.

A

Defined-benefit plans

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17
Q

Employees have little control over the funds until they are received in retirement. The company takes responsibility for the investment and distribution to the retiree. That means the employer bears the risk that the returns on the investment will not cover the defined-benefit amount due to a retired employee

A

Defined-benefit plans

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18
Q

A plan where a set amount is invested for retirement, but the benefit payout is uncertain.

A

Defined-contribution plans

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19
Q

___________ are funded primarily by the employee.

A

Defined-contribution plans

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20
Q

Some retirement benefit plans combine features of defined benefit and defined contribution plans to provide employees with both a guaranteed benefit and investment flexibility.

A

Hybrid Plans

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21
Q

These plans aim to offer the advantages of both types while mitigating their respective drawbacks.

A

Hybrid Plans

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22
Q

________________ allow employers to contribute a portion of their profits to employees’ retirement accounts.

A

Profit-sharing plans

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23
Q

Contributions are typically discretionary and may be tied to the company’s financial performance.

A

Profit-sharing plans

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24
Q

The primary oversight and regulation of pension plans in the Philippines, including their governance, contributions, benefits, and investment policies, are conducted by the ___________________ respectively, for private sector and government employees.

A

SSS and GSIS

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25
Q

BENEFITS OF PENSION FUNDS

A
  • Financial Security in Retirement
  • Tax benefits
  • Long-Term Investment Growth
26
Q

True or False

These agencies (SSS and GSIS) have their own governing laws, regulations, and oversight mechanisms specific to their pension programs.

A

True

27
Q

SSS and GSIS are also governed by _______________.

A

RA 10149 or the GOCC Governance Act of 2011

28
Q

This law was passed by the 15th Congress to enable the State to “actively exercise its ownership rights in GOCCs and to promote growth by ensuring that operations are consistent with national development policies and programs”.

A

RA 10149 or the GOCC Governance Act of 2011

29
Q

The corporate powers and functions of the SSS shall be vested in and exercised by ___________________

A

the Board of Trustees composed of the President and General Manager of the SSS and eight (8) other members, undersecretary

  • the SSS president and seven (7) appointive members
  • three (3) of whom shall represent the workers’ group.
30
Q

The corporate powers and functions of the GSIS shall be vested in and exercised by the Board of Trustees composed ___________

A

the President and General Manager of the GSIS and eight (8) other members to be appointed by the President of the Philippines

31
Q

CHALLENGES of pension Funds

A
  • Adequacy of benefits
  • Informal Sector
  • Sustainability
32
Q

also known as the “Act Providing That Retirement Benefits of Employees of Private Firms Shall Not Be Subject to Attachment, Levy, Execution, or Any Tax Whatsoever,”

A

RA NO. 4917

33
Q

was enacted to safeguard the retirement benefits of private sector employees. Under this law, these benefits are protected from being seized or taxed, ensuring financial security for retirees.

A

RA NO. 4917

34
Q

commonly known as the Retirement Law,

A

RA NO. 7641

35
Q

grants an employee retirement benefits upon reaching the age of 60 years but not beyond 65 years, which is the compulsory retirement age, provided such employee has served at least five years and the retirement benefits are availed of only once.

A

RA NO. 7641

36
Q

is a voluntary retirement savings program offered in the Philippines.

A

The Personal Equity and Retirement Account (PERA)

37
Q

True or False

Investment companies always guarantee a positive return on investment.

A

False

38
Q

True or False

Investment companies in the Philippines are primarily regulated by the Securities and Exchange Commission.

A

True

39
Q

True or False

Investment companies can engage in high-risk speculative trading without informing their investors.

A

False

40
Q

True or False

Investment companies play a crucial role in channeling savings into productive investments, thereby contributing to the growth of the Philippine economy.

A

True

41
Q

True or False

An individual gains part-ownership of all the underlying assets when he or she buys shares in a mutual fund.

A

True

42
Q

True or False

Exchange-traded Funds are passive investments.

A

False

43
Q

When the fund’s shares increase in price, mutual fund shares can be sold in the market for a profit.

A

Capital Gains

44
Q

True or False

Unit investment trusts have high minimum investment requirements.

A

False

45
Q

True or False

Investment companies are regulated by a single global regulatory body.

A

False

46
Q

True or False

Regulatory compliance for investment companies primarily focuses on maximizing profits for shareholders.

A

False

47
Q

True or False

Investment companies are not required to disclose their fees and expenses to investors.

A

False

48
Q

True or False

Compliance regulations for investment companies are standardized globally, with minimal variations across different jurisdictions.

A

False

49
Q

True or False

Once an investment company achieves regulatory compliance, it is exempt from ongoing monitoring and supervision by regulatory authorities.

A

False

50
Q

True or False

ETFs are traded on stock exchanges, similar to individual stocks, allowing investors to buy and sell shares throughout the trading day at market prices.

A

True

51
Q

An index that serves as a benchmark for measuring the performance of the U.S. stock market, particularly the large-cap segment of the market.

A

S&P 500

52
Q

VSMPX is the ticker symbol for Vanguard S&P 500 Index Fund; Admiral Shares.

A

False

53
Q

This UITF uses an algorithm to invest in stocks consisting of the 25 largest and most actively traded companies in the PSEI.

A

RCBC R25 Blue-chip Equity Fund

54
Q

True or False

Only government employees can participate in a pension program in the Philippines.

A

False

55
Q

True or False

The SSS program offers benefits like retirement pensions and disability benefits.

A

True

56
Q

True or False

The GSIS program provides similar benefits to SSS but with potentially higher payouts and is open to everyone.

A

False

57
Q

True or False

PERA contributions are tax-deductible, allowing you to save more for retirement.

A

True

58
Q

True or False

The Philippine government guarantees a fixed amount of money upon retirement through SSS or GSIS.

A

False

59
Q

True or False

The difference between a defined-benefit plan and defined contribution plan lies primarily on who’s responsible for your retirement income: your employer or you.

A

True

60
Q

True or False

RA 4917 applies to both private sector and government employees.

A

False

61
Q
A

2-22. BA-FM 24P(2018)-A (LEC) Banking and Financial Institution (9 decks)

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