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2ND SEM-MIDTERM > FIN2(COMPILATION) > Flashcards

FIN2(COMPILATION) Flashcards

1
Q

Twenty-peso note (₱20) figure

A

Manuel Quezon

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2
Q

Fifty-peso note (₱50)

A

Sergio Osmeña Sr.

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3
Q

One hundred peso note (₱100) figure

A

Manuel Roxas

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4
Q

Two hundred peso note (₱200) figure

A

Diosdado Macapagal.

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5
Q

Five hundred peso note (₱500) figure

A

senator Benigno Aquino Jr. and his wife, President Corazon Aquino.

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6
Q

One thousand peso note (₱1,000) figure

A

José Abad Santos, The second one is Vicente Lim, The third and last person is a woman called Josefa Llanes Escoda.

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7
Q

Consist of all the securities, intermediaries, and markets that exist to match savers and borrowers.

A

financial system

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8
Q

A __________ is a network of financial institutions – such as insurance companies, stock exchanges, and investment banks – that work together to exchange and transfer capital from one place to another.

A

financial system

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9
Q

Through the __________ , investors receive capital to fund projects and receive a return on their investments.

A

financial system

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10
Q

WHAT ARE THE FUNCTIONS OF THE FINANCIAL SYSTEM

A
  1. CREDIT
  2. PAYMENTS
  3. MONEY CREATION
  4. SAVINGS
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11
Q

The financial system serves as a venue for ________. This is made through the means of accepting deposits and loan agreements with the use of various financial instruments.

A

savings

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12
Q

As already stated, _______ find their way into the hands of those in production through the financial system.

A

public savings

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13
Q

The funds are in the hands of the producers, resulting in better goods and services and an increase in society’s living standards. When _________ flow declines, however, the growth of investment and living standards begins to fall.

A

savings

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14
Q

________ is supplied by the financial system to three types of borrowers:
Consumers
Business
Government

A

CREDIT

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15
Q

The ________ takes the forms of currency, checking accounts, and various transactions media.

A

payments system

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16
Q

The financial systems offer a very convenient mode of ______ for goods and services. The check system, credit card systems, et al. are the easiest methods of charge in the economy; they also drastically reduce the cost and time of transactions.

A

payment

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17
Q

One functions of money that state: Banks create new money whenever they make loans.

A

MONEY CREATION

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18
Q

true or false: When borrowers are provided with funds:
➢these firms provide employment to many people
➢make various products and services available
➢pay taxes to the government

A

true

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19
Q

WHAT ARE THE COMPONENTS OR ELEMENTS OF THE FINANCIAL SYSTEM

A
  1. Financial Instruments
  2. The financial sector
  3. Rules governing the conduct of trade
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20
Q

________ are the evidences of debt that are brought and sold in the market. They consist of money, loans (debts) and ownership shares

A

Financial instruments:

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21
Q

The financial sector consisting of:

A
  1. Financial markets
  2. Financial institutions
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22
Q

________ is a mechanism by which savings in one sector of the economy flows to another sector.

A

Financial markets:

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23
Q

_________ is an organization through which funds in the form of money or claims are assembled and transferred from individuals and firms needing extra funds.

A

Financial institutions

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24
Q

What are the rules governing the conduct of trade:

A

Pertinent laws concerning financial institutions
Memoranda, circulars and issuances of concerned government agencies
Pertinent ordinances of local government units where the financial institution is situated
Customs and traditions inherent to the area where the financial institution is situated.

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25
Q

WHAT ARE THE FOUR SECTORS of the economy which are engaged in borrowing and lending

A
  1. Households
  2. Firms
  3. The Government
  4. Foreigners
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26
Q

_________ income comes from wages, dividends, royalties, and interest paid by the firms.

A

Households

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27
Q

______ where the income is spent mostly on goods and services.
The financial system absorbs most of the savings and channel them to firms.

A

Households

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28
Q

What are the two sources of income of firms

A

Those arising out of household expenditures
Those arising out of investment of other firms.

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29
Q

true or false: Part of the firm’s revenues is paid out to households in the form of wages, dividends, royalties and interest. As the cycle is completed it will be repeated all over again.

A

true

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30
Q

The ______ will have its income coming from taxes paid by households and firms.

A

government

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31
Q

Sector of economy which also borrows money from various sources.

A

government

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32
Q

___________ it spends its income derived from taxes and borrowings to purchase buildings, equipment, or supplies. Part of this amount is given out to households in the form of wages, dividends, royalties, and interest.

A

government

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33
Q

__________ includes a country’s dealings with the rest of the world. These flows include exports, imports, and borrowing from other countries.

A

Foreigners

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34
Q

What are the advantages why Household Save and Lend

A

Advantages:
✓ to put enough funds
✓ for use in the future
✓ has the advantage of liquidity (this means that the money could spent as fast as the need arises)

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35
Q

What are the disadvantages why Household Save and Lend

A

Disadvantages:
✓ Loss of purchasing power due to inflation
✓ Opportunity to make income from investment

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36
Q

Why Firms Invest and Borrow

A

✓when opportunities for investment come by
✓ additional investment may bring additional income or economies in operation.
✓ may expand by opening branches in various places.

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37
Q

Two types of transferring funds from lenders to borrowers

A
  1. Surplus Spending Units (SSU)
  2. Deficit Spending units (DSU)
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38
Q

__________ the lenders are those whose revenues exceeded their expenditures.

A

Surplus Spending Units (SSU)

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39
Q

__________ the borrowers have expenditures exceeding their revenues.

A

Deficit Spending units (DSU)

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40
Q

Two kinds of financing

A

Direct and Indirect Financing

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41
Q

_________ borrowing money from friends, directly from investors by selling stocks or bonds.

A

Direct Financing -

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42
Q

________ it is where borrowers borrow funds from the financial market through indirect means such as through financial intermediary.

A

Indirect Financing -

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43
Q

__________ a company that transfers funds from savers to borrowers by receiving funds from savers and investing in securities issued by borrowers.

A

Financial intermediary

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44
Q

____________ refers to the financial entities acting as intermediaries to conduct their clients’ financial transactions. It connects entities with surplus funds and deficit funds.

A

Financial intermediary

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45
Q

____________ include commercial banks, mutual savings bank, credit unions, e insurance companies and pension plans.

A

Financial intermediaries

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46
Q

What are the Functions of Financial Intermediaries

A
  1. Intermediaries help savers diversify their financial investment.
  2. Intermediaries pool the funds of many people
  3. Intermediaries take short-term deposits and make long term loans.
  4. Intermediaries play an important role in the economy by gathering information.
  5. Intermediaries reduce the costs of transacting.
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47
Q

Enumerate the Structure of the Philippine Financial System

A
  1. Bangko Sentral ng Pilipinas
  2. Banking Institutions
  3. Non-Bank Financial Institutions
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48
Q

What are the kinds of Banking Institutions

A
  1. Private Banking Institutions
  2. Government banking institutions
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49
Q

These are examples of
a. Expanded Commercial banks/Universal Banks (EKB/UB)
b. Commercial Banks (KB)
c. Thrifts Banks (TB)
* Savings and Mortgage Banks (SMB)
* Private Development Banks (PDB)
* Stock Savings and Loan Associations (SSLA)
d. Rural Banks (RB)
e. Cooperative Banks

A

Private Banking Institutions

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50
Q

These are examples of:
a. Development Bank of the Philippines (DBP)
b. Land Bank o f the Philippines (LBP)
c. Philippine Al-Amanah Islamic Investment Bank

A

Government banking institutions

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51
Q

These are the examples of:
a. Investment Houses
b. Investment Companies
c. Financing companies
d. Securities dealers/brokers
e. Non-stock savings and loan associations
f . Building and loan associations
g. Pawnshops
h. Lending investors
i. Fund managers
j. Trust companies/departments
k. Insurance companies
l. Venture capital corporations

A

Private Non-Bank Financial Institutions

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52
Q

Pawnshops is under what banking institutions?

A

Private Non-Bank Financial Institutions

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53
Q

Land Bank o f the Philippines (LBP) is under what banking institutions?

A

Government banking institutions

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54
Q

These are the examples of what banking institutions?
a. Government Service Insurance System (GSIS)
b. Social Security System (SSS)
c. Pag-ibig

A

Government Non-bank financial institutions

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55
Q

What are the kinds of Non-Bank Financial Institutions

A
  1. Private Non-Bank Financial Institutions
  2. Government Non-bank financial institutions
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56
Q

Social Security System (SSS)
is what typeof financial institutions?

A

Government Non-bank financial institutions

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57
Q

________________ any marketplace where the trading of securities occurs, including the stock market, bond market, forex market, and derivatives market, among others.

A

Financial Market:

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58
Q

____________ provide a permanent venue for savers and borrowers, and which render financial services whenever required by their customers.

A

Financial Market

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59
Q

What are the Benefits of Financial Markets

A
  1. Funds are directed to DSUs that can use them most efficiently;
  2. Liquidity is provided to savers
    In accounting, liquidity is a measure of the ability of a debtor to pay their debts as and when they fall due.
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60
Q

What are the Classification of Financial Markets

A
  1. primary market
  2. Secondary market
  3. Money market
  4. Capital market
  5. Bond market
  6. Stock market
  7. Mortgage market
  8. Consumer market
  9. Auction market
  10. Negotiation market
  11. Organized market
  12. Over-the-counter market
  13. Spot market
  14. Futures market
  15. Options market
  16. Foreign exchange market
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61
Q

The ___________ is where companies issue a new security, not previously traded on any exchange.

A

primary market

62
Q

The ____________ may also be called the New Issue Market (NIM).

A

primary market

63
Q

In the ___________ , securities are directly issued by companies to investors. Securities are issued either by an Initial Public Offer (IPO) or a Further Public Offer (FPO).

A

primary market

64
Q

The ____________ is where investors buy and sell securities from other investors (think of stock exchanges). For example, if you want to buy Apple stock, you would purchase the stock from investors who already own the stock rather than Apple.
Apple would not be involved in the transaction.

A

secondary market

65
Q

The __________ is an organized exchange market where participants can lend and borrow short-term, high-quality debt securities with average maturities of one year or less.

A

money market

66
Q

__________ also allow individual investors to invest small amounts of money in a low-risk setting.

A

Money markets

67
Q

Some of the instruments traded in the money market includes:

A
  1. Treasury bills
  2. Certificates of deposit
  3. Commercial paper
  4. Federal funds
  5. Bills of exchange
  6. short-term mortgage-
  7. backed securities
  8. asset-backed securities
68
Q

__________ enables governments, banks, and other large institutions to sell short-term securities to fund their short-term cash flow needs.

A

Money market

69
Q

__________ are the exchange system platform that transfers capital from investors who want to employ their excess capital to businesses that require the capital to finance various projects or investments.

A

Capital markets

70
Q

The___________is that portion of the financial market where trading is undertaken for securities with maturity of more than one year.

A

Capital markets

71
Q

The capital market is subdivided into three parts:

A
  1. the bond market
  2. the mortgage market
  3. stock market
72
Q

The __________ is where investors go to buy and sell debt securities issued by corporations or governments.

A

bond market

73
Q

True or False: The bond market (also debt market or credit market)

A

True

74
Q

Financial market where participants can issue new debt, known as the
____________, or buy and sell debt securities, known as the______________. This is usually in the form of bonds, but it may
include notes, bills, and so on for public and private expenditures.

A
  1. primary market
  2. secondary market
75
Q

A__________is a place where investors go to trade equity securities (e.g., shares) issued by corporations. It is where the common and preferred stocks issued by corporations are traded.

A

stock market

76
Q

Stock market has two components:

A
  1. Organized exchange
  2. Over the counter markets (OTC)
77
Q

__________ trading is done in over-the-counter markets (a decentralized place with no physical location), through dealer networks.

A

Over the counter markets (OTC)

78
Q

____________is a decentralized market in which market participants trade stocks, commodities, currencies, or other instruments directly between two parties and without a central exchange or broker.

A

Over the counter markets (OTC)

79
Q

It is the trading of securities between two counterparties executed outside of formal exchanges and without the supervision of an exchange regulator.

A

Over the counter markets (OTC)

80
Q

True or False: Over the counter markets (OTC) is less formal

A

true

81
Q

_________ a securities marketplace where purchasers and sellers regularly gather to trade securities according to the formal rules adopted by the exchange.

A

Organized exchange

82
Q

The _____________ is that portion of the financial market which deals with loans on residential , commercial, and industrial estate,
and on farmland.

A

mortgage market

83
Q

This market is involved in loans on autos, appliances, education, travel, etc.

A

Consumer market

84
Q

_________ where buyers and sellers enter competitive bids simultaneously.
The price at which a stock trades represents the highest price that a buyer is willing to pay and the lowest price that a seller is willing to accept.

A

Auction market

85
Q

_________ is a type of secondary market exchange in which the prices of each security are bargained out between buyers and sellers.

A

Negotiation market

86
Q

What type of market where there are no market-makers or order matching.

A

Negotiation market

87
Q

Buyers and sellers actively negotiate on the price at which a transaction is finalized either directly or through the use of brokers.

A

Negotiation market

88
Q

___________ is a financial market with fixed trading rules. It is situated at a central location in the financial district in which trading is generally conducted by auction.

A

Organized market

89
Q

True or False: Another name for organized market is the Philippine Stock Exchange (PSE).
Common and peferred stocks, bonds and warrants are sold at the PSE.

A

True

90
Q

___________ consists of a large collection of brokers and dealers, connected electronically by telephones and computers, that provides for trading in listed securities.

A

Over-the-counter market

91
Q

The over-the-counter market consists of facilities, namely

A
  1. the relatively few dealers who hold inventories of over the counter securities and act as a securities market.
  2. the many brokers who act as agents in bringing these
    dealers together with investors, and
  3. the computers, terminals, and electronic networks that
    provide a communications link between dealers and brokers.
92
Q

_________ when securities are traded for immediate delivery and payment.

A

Spot market

93
Q

Type of market where the spot price is the price paid or a security that will be delivered
on the spot or immediately.

A

Spot Market

94
Q

True or False: The term”immediately” may actually mean one or two
days to one week

A

True

95
Q

____________ where contracts are originated and traded that give the holder the right to buy something in the future at a price specified by the contract.

A

Futures market

96
Q

True or False: Futures markets or futures exchanges are where these financial products are bought and sold for delivery at some agreed-upon date in the future with a price fixed at the time of the deal.

A

True

97
Q

Type of market where an ‘option’ is an agreement that allows (but doesn’t mandate) trading between two parties to buy or sell or trade instruments like securities

A

option market

98
Q

The _________ is one where stock options are traded.

A

option market

99
Q

The ____________ is the market where people buy and sell foreign currencies.

A

Foreign exchange market

100
Q

What market is commonly referred to as the Forex or FX, is the global marketplace for the trading of one nation’s currency for another.

A

Foreign exchange market

101
Q

_________ refers to any document that represents an asset to one party and liability to another.

A

FINANCIAL INSTRUMENTS

102
Q

As per the definition by International Accounting Standards (IAS), _____________ are any “contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.”
The written legal obligation of one party to transfer something of value, usually money, to another party at some future date, under certain conditions.

A

FINANCIAL INSTRUMENTS

103
Q

________ carry a monetary value and are legally enforceable. One can also create, modify and trade such instruments, which represent a binding agreement between two or more parties.

A

FINANCIAL INSTRUMENTS

104
Q

WHAT ARE THE OF USES FINANCIAL INSTRUMENTS

A
  1. Means of Payment
  2. Store of Value
  3. Transfer of Risk
105
Q

Buyer transfer risk to seller

A

Transfer of Risk

106
Q

But much less liquid than money.

A

Means of Payment

107
Q

Better than money over time, but also greater risk

A

Store of Value

108
Q

WHAT ARE THE DIFFERENCES AMONG FINANCIAL INSTRUMENTS

A
  1. DENOMINATION
  2. MATURITY
  3. CLAIM AGAINST ISSUER
  4. COLLATERAL:
  5. TERMS TO REPRICING:
  6. MARKETABILITY
  7. FORMS OF INTEREST PAYMENT
  8. OPTIONS
    9.CURRENCY
109
Q

IT MEANS THAT: Most financial instrument are denominated in pesos, while a few are in dollars and other currencies

A

CURRENCY

110
Q

Options consist of the following types:

A
  1. Call options
  2. Put options
  3. Convertibility options
111
Q

__________ these permit the issuer to redeem the instrument before maturity

A

Call options

112
Q

____________ these permit the investors to sell back to the issuer before maturity

A

Put options

113
Q

___________ these permit the investor to convert from one instrument to another

A

Convertibility options

114
Q

Two forms of interest payments:

A

A. By coupons
B. By periodic addition to the principal amount

115
Q

Financial instruments may differ in terms of whether they are highly marketable or not.

A

MARKETABILITY

116
Q

True of False: The lower the costs, the higher the marketability.

A

True

117
Q

Interest rates paid by the borrower may change before maturity.

A

TERMS TO REPRICING:

118
Q

________ are those whose coupon rates are fixed throughout their maturities.

A

Fixed coupon (rate) bonds

119
Q

_________ may change before maturity

A

Variable or floating coupon (rate) bonds

120
Q

TYPES OF TERMS TO REPRICING

A
  1. Fixed coupon (rate) bonds
  2. Variable or floating coupon (rate) bonds
121
Q

Debt claims may be collaterized by specific assets, and thus, they are higher order than those which are not.

A

COLLATERAL:

122
Q

Ownership claims have residual, but unlimited claim on the earnings after all other claims have been satisfied.

A

COLLATERAL:

123
Q

________ also called stocks

A

Ownership claims

124
Q

Financial instruments may be categorized into
two types:

A
  1. Ownership claims,
  2. Debt claims
125
Q

Two types of Ownership claims:

A
  1. Preferred stock
  2. Common stocks
126
Q

___________ stipulates a maximum amount of dividend claims that may be received.

A

Preferred stocks:

127
Q

_________ have no limitations as to the amount of dividends received

A

Common stocks:

128
Q

_________ are liabilities which must be settled on given dates.

A

Debt claims:

129
Q

Financial instruments differ in terms of_________, as some like demand deposits are accepted by commercials banks for short as one day, while some, like bonds may be issued with a maturity term of more than 10 years.

A

maturity

130
Q

WHAT ARE THE FINANCIAL INSTRUMENTS TRADED IN THE MONEY MARKET

A
  1. Treasury bills
  2. Commercial paper
  3. Banker’s acceptance
  4. Repurchase agreements
  5. Tax anticipated bills
  6. Interbank call loans
  7. Certificate of assignment
  8. Certificate of participation
131
Q

Financial instruments with highly stable marketability.
Issued by the Philippine government on various maturities up to one year.
Terms: 91 days, 182 days and 364 days.

A

Treasury bills or T-bills

132
Q

True or False: Banks are the main holders of treasury bills

A

true

133
Q

A _________ is a short-term promissory note issued by a large, established firm with a strong credit rating.
Term: 60 day, 90-day, or 180-day basis.

A

commercial paper

134
Q

Unsecured and are sold at discount like treasury bills.

A

commercial paper

135
Q

A form of payment that is guaranteed by a bank rather than an individual account holder.
Most frequently used in international trade

A

Banker’s acceptance

136
Q

Traded at a discount in the secondary money markets

A

Banker’s acceptance

137
Q

__________ is a letter issued by a bank to another bank (typically in a
different country) to serve as a guarantee for payments.

A

LETTER OF CREDIT

138
Q

A temporary sale of high-quality easily liquidated assets, such as treasury bills, accompanied by an agreement to buy back those assets on a specific future date at a predetermined price.

A

Repurchase agreements

139
Q

Short term debt instruments issued by the government to cover temporary cash shortages.

A

Tax anticipated bills

140
Q

True or False: The advantage of the tax anticipation bill is that the interest earnings are tax exempt.

A

True

141
Q

_________ short term securities sold by the Treasury Department.

A

Cash Management bills (CMBs)

142
Q

True or False: CMBs are not placed up for sale consistently and are typically only done so when the government is experiencing a shortage of cash reserves.

A

True

143
Q

Banks must maintain minimum reserves and may face deficiencies due to unpredictable factors like high withdrawals. They resolve this by borrowing from another bank. The borrowings, called _________ are oftentimes made on an overnight basis only.

A

interbank call loans,

144
Q

A financial instrument issued by a borrower transferring ownership of a batch of promissory notes to the lender.

A

Certificate of assignment

145
Q

Also a new form of credit instrument whereby banks can raise funds from other banks and other central bank approved financial institutions to ease liquidity.

A

Certificate of participation

146
Q

_________ may be defined as the rental price of money usually expressed as the annual percentage of the nominal amount of money borrowed.

A

Interest rate

147
Q

True or False: Interest viewed in two opposites ways:
To the borrower, interest is the penalty paid for using income before it is earned.
To the lender, interest is the reward received from postponing consumption up to the maturity of the loan.

A
148
Q

___________ is a form of computing interest on an annual basis.

A

Simple Interest

149
Q

__________ is that method of calculating interest on the original capital invested and on interest earned on previous periods.

A

Compound Interest

150
Q

TYPES OF CALCULATING INTEREST

A
  1. Simple Interest
  2. Compound Interest

2ND SEM-MIDTERM (9 decks)

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