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SEC Mock Exam > Module 1: Fundamentals of Equity Securities > Flashcards

Module 1: Fundamentals of Equity Securities Flashcards

1
Q

Non-voting shares can vote in the following situations except:

A. Merger and consolidation
B. Increase in authorized capital stock
C. Determination of remuneration of Board of Directors
D. None of the above

A

D. None of the above

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2
Q

Which of the following can be performed by a salesman?

A. Disclose non-public information
B. Disclose company information upon request
C. Transact client’s money in advance prior to client’s instruction
D. All of the above

A

B. Disclose company information upon request

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3
Q

Juridical personality is granted upon issuance of:

A. By-laws
B. Articles of Incorporation
C. Certificate of Incorporation
D. Shares of stock

A

C. Certificate of Incorporation

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4
Q

If a company wants to retire its Treasury Shares, it should

A. Increase capital stock
B. Issue new shares
C. Release retained earnings
D. Reissue the Treasury Shares

A

D. Reissue the Treasury Shares

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5
Q

A juridical person can be a buyer if:
- It has a gross income of at least PHP 100 million
- It has a total portfolio investments of at least PHP 60 million in securities registered with the SEC or financial instruments issued by the government.

A. Statement I is true, statement II is false
B. Statement I is false, statement II is true
C. Both statements are true
D. Both statements are false

A

B. Statement I is false, statement II is true

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6
Q

Which of the following provisions in the Article of Incorporation cannot be subject to amendments?

A. Name of corporation
B. Name of incorporators
C. Terms of existence
D. Primary purpose

A

B. Name of incorporators

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7
Q

In bookkeeping purposes, the outstanding shares of stock of a corporation are entered into its books at:

A. Book Value
B. Market Value
C. Net Asset Value
D. Par Value

A

D. Par Value

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8
Q

If Maricel does not invest in cyclical industries, she still might buy stocks in a company that produces:

A. Minivans
B. Refrigerator
C. Bricks and Stucco
D. Antihistamine or allergy medicines

A

D. Antihistamine or allergy medicines

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9
Q

When a bond is “selling at premium”, it means:

A. The bond is better quality than other issues
B. The current yield is more than the yield of maturity
C. The price of the bond is above its fair value
D. The rating of the bond will be upgraded

A

C. The price of the bond is above its fair value

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10
Q

All of the following pay dividends, EXCEPT:

A. Debentures
B. Cumulative preferred stocks
C. Common shares
D. Participating preferred shares

A

A. Debentures

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11
Q

Which is the correct ranking of securities according to tenor (from shortest to longest)?

A. Treasury Notes, Treasury Bonds, Treasury Bills
B. Treasury Bills, Treasury Notes, Treasury Bonds
C. Treasury Bonds, Treasury Bills, Treasury Notes
D. Treasury Bills, Treasury Bonds, Treasury Notes

A

B. Treasury Bills, Treasury Notes, Treasury Bonds

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12
Q

Which are true about rights offering?
I. Offering price of new shares are below the market price of their existing shares
II. Offering price of new shares are above the market price of their existing shares
III. Through rights offerings, existing shareholders have the choice of maintaining proportionate investment in the company
IV. Companies can use rights to dilute the holdings of existing owners.

A. II, III & IV
B. I, III & IV
C. III
D. I

A

B. I, III & IV

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13
Q

A bond has an 11% coupon. The bond has a current market price of PHP1,050.00. The current yield is:

A. 10.95%
B. 10.48%
C. 10.47%
D. None of the above

A

B. 10.48%

Current Yield = Coupon/Current Market Price
Current Yield = 11% x 1000/1,050 =10.47619 or 10.48%

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14
Q

Which of the following is the correct arrangement according to seniority in liquidation?

A. Common stock, preferred stock, mortgage bond, debenture
B. Mortgage bond, debenture, preferred stock, common stock
C. Preferred stock, mortgage bond, debenture, common stock
D. Debenture, mortgage bond, preferred stock, common stock

A

B. Mortgage bond, debenture, preferred stock, common stock

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15
Q

Which of the following depicts a normal yield curve:

A. 30 days (3.50%), 90 days (4%), 180 days (4.50%), 360 days (5%), 2 yrs(6%)
B. 30 days (3%), 90 days (4%), 1 yr(2%), 2 yr(4%), 3 yr(5%)
C. 30 days (3%), 60 days (7%), 90 days (4%), 2 yr(4%), 3 yr(3%)
D. 30 days (7.50%), 40 days (6%), 1 yr(5%), 2 yr(3.50%), 1st month (2%)

A

A. 30 days (3.50%), 90 days (4%), 180 days (4.50%), 360 days (5%), 2 yrs(6%)

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16
Q

A foreigner sells his USD and purchases a Peso Treasury Bill. What are the risks involved?
- Market Risk
- Sovereign Risk
- Price Risk
- Liquidity Risk

A. I and II
B. I and III
C. I, II and III
D. All of the above

A

C. I, II and III

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17
Q

A written authorization allowing another person to vote in the place of a shareholder is:

A. Warrant
B. Right
C. Debenture
D. Proxy

A

D. Proxy

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18
Q

To raise additional funds to finance its operations, a company may:

A. Issue equity securities
B. Issue debt securities
C. Borrow from banks and lending institutions
D. All of the above

A

D. All of the above

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19
Q

Which of the following is the correct arrangement when declaring dividends?

A. Ex-dividend date, Declaration date, Record date, Payment date
B. Declaration date, Record date, Ex-dividend date, Payment date
C. Declaration date, Ex-dividend date, Record date, Payment date
D. Record date, Ex-dividend date, Declaration date, Payment date

A

C. Declaration date, Ex-dividend date, Record date, Payment date

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20
Q

If a corporation gives shares of stock of another corporation owned by the company as a form of dividend to its stockholders, then the type of dividend is called:

A. Transferred dividend
B. Property dividend
C. Stock dividend
D. Cash dividend

A

B. Property dividend

21
Q

This type of voting affords minority shareholders their best opportunity for gaining representation on the Board of Directors:

A. Statutory Voting
B. General Voting
C. Cumulative Voting
D. None of the above

A

C. Cumulative Voting

22
Q

How much interest will Maya receive if she invests PHP 10,000.00 in a time deposit with a Philippine Bank at 4% for 90 days?

A. PHP 92.50
B. PHP 100.00
C. PHP 107.50
D. PHP 400.00

A

B. PHP 100.00

90 Days = 1Q
P10,000 x .04 = P400 pa
P400pa / 4 = P100 for 90 days or per quarter

23
Q

Which of the following refers to an act or contract which is beyond the power of a corporation can lawfully exercise?

A. Ultra Vires act
B. Intra Vires act
C. Illegal act
D. Immoral act

A

A. Ultra Vires act

24
Q

The sale of securities to the following are considered exempt transactions EXCEPT:

A. Bank
B. Registered Investment House
C. Insurance Company
D. None of the above

A

D. None of the above

25
Q

What will you receive at maturity date of a bond if it pays interest on June 30, and also matures on June 30?

A. Principal
B. Interest
C. Principal and Interest
D. None of the above

A

C. Principal and Interest

26
Q

This refers to the right of the issuer to retire the issue prior to the stated maturity date.

A. Appraisal Right
B. Call Feature
C. Put Feature
D. Right of First Refusal

A

B. Call Feature

27
Q

Which of the following instruments invested in by an individual are free and clear of withholding tax?

A. Commercial paper
B. 7-year long term negotiable CDs
C. 4-year corporate bonds
D. Bank Tier 2

A

D. Bank Tier 2

28
Q

This is a type of order validity where a client places an order with the intention of having the order matched at its entirety or not at all.

A. Fill-and-Kill
B. Fill-or-Kill
C. Fish-and-Kill
D. Fish-or-Kill

A

B. Fill-or-Kill

29
Q

What is a watered stock?

A. Cash paid is less than par value
B. Property or services exchanged is less than par value
C. No consideration exchanged for the stock
D. All of the above

A

D. All of the above

30
Q

Who should withhold and when should the withholding tax be withheld for government securities issued in the Philippines?

A. The investor will repay/remit tax to the government upon receipt of the coupon
B. Dealer or broker will withhold tax at each coupon interest payment
C. The issuer will withhold tax at each coupon payment date
D. The broker or dealer will withhold tax on maturity of these

A

C. The issuer will withhold tax at each coupon payment date

31
Q

A call feature enables an issuer to pay off bonds:

A. Upon majority of votes of the bondholders
B. At an amount less than stated par value
C. After the stated maturity
D. Prior to the scheduled maturity

A

D. Prior to the scheduled maturity

32
Q

Rodelbought a 3-year bond with face value of 1,000,000 for 975,000. The coupon of the bond is payable on April 30 and September 30 each year. The maturity of the bond is September 30. What will he receive at the maturity of the bond?

A. The face value of 1,000,000
B. His principal of 975,000
C. Principal and face value
D. Face value and last coupon

A

D. Face value and last coupon

33
Q

CDE Incorporated has 30,000,000 shares of common stock authorized, 21,000,000 shares have been issued and there are 6,000,000 shares of treasury stock. How many shares are outstanding?

A. 15,000,000
B. 9,000,000
C. 24,000,000
D. 3,000,000

A

A. 15,000,000

21 M shares (issued) - 6M shares (treasury) = 15M outstanding shares

34
Q

A stock split refers to a corporation action that increases the number of shares in a company. In effect, the share in par/price _______.

A. Is maintained
B. Decreases
C. Increases
D. None of the above

A

B. Decreases

35
Q

Bonds rated “CC” or below are called?

A. Trash Bonds
B. Junk Bonds
C. Investment Grade Bonds
D. Medium Grade Bonds Rephrased question

A

B. Junk Bonds

36
Q

If a convertible preferred stock has a conversation ratio of 3, what should be its market price to be at parity with the common stock which is trading at PHP 15.00?

A. PHP 18.00
B. PHP 45.00
C. PHP 5.00
D. PHP 12.00

A

B. PHP 45.00

Parity Price= Price of stock x conversion ratio

37
Q

The following are acceptable considerations for the issuance of shares except:

A. Actual cash paid in corporation
B. Amounts transferred from unrestricted retained earnings to a capital stock
C. Service to be performed by a lawyer on the proposed increase of capital stock of corporation
D. None of the above

A

C. Service to be performed by a lawyer on the proposed increase of capital stock of corporation

38
Q

If a client buys an FXTN on a Friday, when is the settlement?

A. Monday
B. Tuesday
C. Wednesday
D. Thursday

A

A. Monday

Bonds: T+1

39
Q

Which of the following are true?

I. An investor can opt to be a non-qualified investor in the OTC
II. A qualified investor may deal in the OTC
III. A non-qualified investor can only deal in the OTC through a broker
IV. A non-qualified investor may deal in the OTC by participating in a non-directional trust account

A. I and II
B. II and III
C. I, II and III
D. All of the above

A

D. All of the above

Qualified Investor – Financial Sophistication (Banks, Investment Houses, etc..)

40
Q

juridical person can be a buyer if:

I. It has a gross income of at least PHP 100,000,000
II. It has a total portfolio investment of at least PHP 60,000,000 in securities registered with the SEC or financial instruments issued by the government

A. Statement I is true, statement II is false
B. Statement I is false, statement II is true
C. Both statements are true
D. Both statements are false

A

B. Statement I is false, statement II is true

41
Q

Helps companies raise funds, gives financial advice to help the issuer and also assists in marketing the securities to be issued:

A. Broker
B. Investment Company
C. Investment Banker
D. Clearing Agency

A

C. Investment Banker

42
Q

All of the following are common attributes for preferred stock and bonds EXCEPT:

A. Periodic payments to owners
B. Can be callable
C. Fixed maturity date
D. Fixed payment date

A

C. Fixed maturity date

43
Q

Consider two bonds, A and B. They are both issued at the same time by the same corporate firm. They both have the same maturity, seniority and coupon. The only difference between the two bonds is that A is callable and B is not. Which of the following best describes the relationship between A and B?

A. Bond A will have a higher yield than bond B
B. Bond B will have a lower yield than bond A
C. Bond A can have a lower yield than bond B
D. Both A and B will have the same yields

A

C. Bond A can have a lower yield than bond B

44
Q

According to the Corporation Code of the Philippines, ________ is one where a corporation absorbs the other and remains in existence while others are dissolved.

A. Acquisition
B. Consolidation
C. Liquidation
D. Merger

A

D. Merger

45
Q

How many months interest are paid with the first coupon for a bond issued January 1, 2007 and first coupon April 1, 2007?

A. 1 month
B. 2 months
C. 3 months
D. 6 months

A

C. 3 months

46
Q

In which of the following can a stockholder dissent, demand or withdraw his shares anytime?

A. In case of amendment
B. In case of sale
C. In case of merger and consolidation
D. All of the above

A

D. All of the above

47
Q

Juan took his CIS exam license on January 5, 2010. He was a licensed salesman from 2010-2013. From 2013 to 2015, he was living in the US. He went back to the Philippines the next year and went to SEC to ask for the status of his license. What will SEC ask him to do?

A. SEC will request for proof that he took the exam on 2010
B. SEC will request for proof that he took the exam on 2016
C. SEC will renew his license provided that he pays a fee
D. SEC will not renew his license anymore

A

B. SEC will request for proof that he took the exam on 2016

48
Q

Which type of share will be prioritized upon liquidation?

A. Treasury
B. Common
C. Outstanding
D. Preferred

A

D. Preferred

SEC Mock Exam (6 decks)

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