Test (120 Items)

Question 1

1. What must a corporation do in order to retire its treasury shares?
   A. Erase corporate deficits
   B. Amend its articles of incorporation
   C. Amend its bylaws
   D. Gather 2/3 shareholder approval

Answer 1

Answer: A
Power to acquire own shares
- AKA treasury shares
- Allowed as long as there is unrestricted retained earnings

Question 2

2. What can not be amended in the Articles of Incorporation?
   A. Name of Corporation
   B. Name of Incorporators
   C. Address of the corporation
   D. Purpose of the corporation

Answer 2

Answer: B
Corporator vs Incorporator – Sec. 5
- Corporator – Shareholders
- Incorporator – original corporators mentioned in the articles of
incorporation

Question 3

3. Which of the following is a violation of the trust fund doctrine?
   A. Issuance of watered shares
   B. Directors dealing with the company
   C. Issuance of participating preferred shares
   D. Issuance of no par value shares

Answer 3

Answer: A
Trust fund doctrine is a principle of judicial invention which says that corporate assets are held as a trust fund for the benefit of shareholders and creditors and
that the corporate officers have a fiduciary duty to deal with them properly.
Issuance for less than consideration
- Called watered shares
- Violation of trust fund doctrine

Question 4

4. In which of the following scenarios can non voting shares vote?
   A. Holding company investing in another company
   B. Amendment of by-laws
   C. Mortgage of property for a real estate company
   D. Incurrence of indebtedness

Answer 4

Answer: B
1. Dissolution
2. Amendment of the articles of incorporation
3. Adoption and amendment of by-laws
4. Incurring, creating or increasing bonded indebtedness
5. Increase or decrease of capital stock
6. Investment of corporate funds in another corporation or business in accordance with this Code
7. Merger or consolidation of the corporation with another corporation or other corporations
8. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the
corporate property

Question 5

5. Who elects the board of directors of a corporation?
   A. Common stockholder
   B. Preferred stockholder
   C. Bond holders
   D. Management

Answer 5

Answer: A
1. Ordinary
a. Par value
b. No Par Value
 Has to have stated value
 Cannot be issued for less than PHP5.00 per share
 Authorized capital is now called authorized number of shares
 Non assessable and deemed fully paid upon issuance
 Entitled to voting

Question 6

6. Which of the following represents the maximum amount of capital a corporation can issue?
   A. Authorized Capital
   B. Paid in capital
   C. Issued capital
   D. Shareholders’ equity

Answer 6

Answer: A
- Authorized Capital – max no. of shares * par value
- Issued Capital – Issued shares *par value
- Outstanding Capital – Issued AND outstanding
- Treasury shares – issued BUT NOT outstanding

Question 7

7. Which of the following statements is false?
   A. Treasury shares are still considered issued capital
   B. Treasury shares are not entitled to dividends
   C. Treasury shares are outstanding
   D. Treasury shares are not entitled to vote

Answer 7

Answer: C
Treasury shares
a. Issued but not outstanding shares
b. No voting rights
c. No rights to dividends
d. Can be disposed of for a reasonable price
e. Reduces capital

Question 8

8. Which of the following statements is true?
   A. Under the old corporation code, minimum authorized capital is P80,000
   B. Under the old corporation code, a corporation with P1,000,000 authorized capital must have at least P62,500 of its capital stock subscribed
   C. Under the old corporation code, minimum paid up capital must be P10,000
   D. Under the new corporation code of 2019, 50% of

Answer 8

Answer: A
The 25-25 rule (gone in new)
P5,000 Min. paid up capital (gone in new)
5,000/.25 = 20,000 (minimum subscribed capital)
20,000/.25 = 80,000 (minimum authorized capital)

Question 9

9. Which of the following statements is false?
   A. Ordinary shares can be issued at no par value
   B. A corporation can have both par and no par value shares
   C. No par value shares can be issued as payment for pre-
   incorporation expenses
   D. Preferred shares can be issued without par value

Answer 9

Answer: D
1. Preferred
a. Preference as to:
 Asset – in case of liquidation
 Dividends – in case of profit distribution
b. Can never be no par value
c. Only class that can be deprived of voting rights

Question 10

10. Which is false about watered shares?
    A. No par value ordinary shares can never be watered shares
    B. Watered shares are shares issued for less than full consideration
    C. Shares issued for less than their par value are considered watered shares
    D. Watered shares are a violation of the trust fund doctrine

Answer 10

Answer: A
No Par Value ordinary shares
 Has to have stated value
 Cannot be issued for less than PHP5.00 per share
 Authorized capital is now called authorized number of shares
 Non assessable and deemed fully paid upon issuance

Question 11

11. In which of the following circumstances are non voting shares still not allowed to vote?
    A. Corporate dissolution
    B. Retirement of treasury shares
    C. Amendment of bylaws
    D. Increase in capital stock

Answer 11

Answer: B
1. Dissolution
2. Amendment of the articles of incorporation
3. Adoption and amendment of by-laws
4. Incurring, creating or increasing bonded indebtedness
5. Increase or decrease of capital stock
6. Investment of corporate funds in another corporation or business in accordance with this Code
7. Merger or consolidation of the corporation with another corporation or other corporations
8. Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the corporate property

Question 12

12. These corporate documents provide for the internal
    operations of the corporation and how the board of
    directors must act and run the corporation.
    A. Articles of incorporation
    B. By Laws
    C. SEC Certificate of Registration
    D. Certificate of Stock

Answer 12

Answer: B
By-laws - internal government and operations of a
corporation

Question 13

13. An intravires act is an act that is:
    A. Within the confines of the powers of a corporation
    B. Can only be exercised by the board of directors
    C. Outside the scope of authority given to a corporation
    D. Amended by a majority of the board of directors and ratified
    by 2/3 of shareholders

Answer 13

Answer: A
Ultra Vires vs Intra Vires – Sec. 45
- Ultra Vires - beyond authority
- Intra Vires – within authority

Question 14

14. Articles of incorporation:
    A. Is a condition antecedent the formation of the corporation
    B. Contain the name of the original corporators
    C. State the purpose of existence of the corporation
    D. All of the above

Answer 14

Answer: D
Articles of incorporation is a requirement needed before the
formation of a corporation

Question 15

15. When does a corporation attain juridical personality?
    A. Issuance of SEC Cert
    B. 30 days after issuance of SEC Cert
    C. Upon filing of articles of incorporation
    D. Upon filing of the by laws

Answer 15

Answer: A
Sec. 18 - corporate existence starts upon issuance of the
SEC Certificate of incorporation

Question 16

16. It is the doctrine that stated that the corporation is a different
    entity from the shareholders; Disregarded when the law is used to
    defeat public convenience, justify wrong or cover fraud
    A. Doctrine of Corporate Veil of Identity
    B. Trust fund doctrine
    C. Doctrine of Corporate Opportunity
    D. None of the above

Answer 16

Answer: A
Doctrine of corporate veil; piercing the veil of corporate fiction
- Disregarded when the law is used to defeat public
convenience, justify wrong or cover fraud

Question 17

17. Which of the following is false regarding corporate term under the old corporation code:
    A. A corporation can extend its corporate term within 5 years from the date of its expiration
    B. Corporate term can only be at 50 years at a time
    C. A corporation can shorten its corporate term
    D. A corporation can extend its life for more than 50 years per instance

Answer 17

Answer: D
Sec. 11
- Corporate term is for a period of max 50 years from date of incorporation.
- Extendible by another 50 years.
- Extension cannot be made 5 years before expiration.

Question 18

18. Which of the following defines a De Jure Corporation
    A. A corporation that has formed within the express powers of
    the law
    B. Corporation by estoppel
    C. A corporation whose veil can be pierced
    D. A corporation that exists as far as its shareholders and
    directors are concerned but does not have juridical identity

Answer 18

Answer: A
De Jure – corporation within the proper confines of the law
n Corporation by law

Question 19

19. It is now January 2020 and a corporation is nearing the end of its corporate term by September 2025, what course of action can the corporation take:
    A. Under the old corp code, immediately apply for an extension of more than 50 years
    B. Nothing, under the old corporation code, they cannot apply for extension yet
    C. Let the corporation involuntarily dissolve
    D. the corporation would have achieved their main purpose of existence before then and would voluntary dissolve

Answer 19

Answer: B
Old corp code:
Sec. 11
- Corporate term is for a period of max 50 years from date of incorporation.
- Extendible by another 50 years.
- Extension cannot be made 5 years before expiration.
New Corp code: perpertual unless AOI provides otherwise

Question 20

20. It is the document that serves as proof of ownership of a
    share of stock
    A. Voting trust agreement
    B. Stock Certificate
    C. Statement of Account
    D. Articles of incorporation

Answer 20

Answer: B

Question 21

21. Which of the following is not provided by in the articles
    of incorporation:
    A. Purpose of existence of the corporation
    B. Names of incorporators
    C. Registered name
    D. Manner of voting of officers

Answer 21

Answer: D
Sec. 47
- By-laws – provide for the internal government and
operations of a corporation

Question 22

22. All of the following are included in the powers given to a
    corporation except:
    A. Establish a pension, retirement or other plans
    B. Adopt bylaws
    C. To sue or be sued in its corporate name
    D. To sell substantially all of its assets

Answer 22

Answer: D
Approval of majority of board of directors and 2/3 of
shareholders are needed for a corporation to sell
substantially all of its assets

Question 23

23. A corporation has sustained a deficit since inception but would like to purchase its own excess shares of stock in the market, which of the following should be their course of action:
    A. Buy shares from the market and keep them as treasury shares
    B. Eliminate the deficit
    C. Split their shares up
    D. Issue stock dividends

Answer 23

Answer: B
Power to acquire own shares
- AKA treasury shares
- Allowed as long as there is unrestricted retained earnings
Corporation has sustained a deficit in the scenario given

Question 24

24. Which of the following reasons are acceptable as exception to the maximum amount allowable as retained earnings:
    A. Reserves for corporate expansion
    B. Reserve for contingencies
    C. Loan covenants
    D. All of the above

Answer 24

Answer: D
Sec. 43
- Exceptions to the 100% of capital stock/ share capital:
a. Corporate expansion
b. Loan covenants
c. Reserve for contingencies

Question 25

25. Which of the following is not found in the by-laws of a
    corporation:
    A. Time, place and manner of calling or conducting
    meetings
    B. Qualifications of directors
    C. Purpose of the corporation
    D. Manner of issuing stock certificates

Answer 25

Answer: C
Purpose of the corporation is stated in the articles of
incorporation

Question 26

26. Which of the following combination of roles is a violation
    of the corporate code:
    A. Treasury and Secretary
    B. President and Secretary
    C. Treasurer and President
    D. B and C

Answer 26

Answer: D
Sec.25 - President (CEO) can never be the same as the
treasurer or secretary

Question 27

27. Which of the following is a violation of the corporate
    code with regard its officers:
    A. A non resident treasurer
    B. A non citizen president
    C. A Swiss secretary
    D. Treasurer being the secretary at the same time

Answer 27

Answer: C
Sec. 25 – Corporate Secretary must be RESIDENT CITIZEN
OF PH

Question 28

28. Which of the following cannot be the consideration for issuance of shares of stock in a corporation:
    A. Future Service
    B. Issuance of bonds
    C. Promissory notes
    D. All of the above

Answer 28

Answer: D
Sec. 62
Can never become the consideration for stocks:
1. Future service
2. Promissory notes
3. Issuance of bonds

Question 29

29. It is an agreement between a group of the stockholders of a corporation and the trustee or by a group of identical agreements between individual stockholders and a common trustee, whereby it is provided that for a term of years, or for a period contingent upon a certain event, or until the agreement is terminated, control over the stock owned by such stockholders, either for certain purposes or for all purposes, is to be lodged in the trustee, either with or without a reservation to the owners, or persons designated by them, of the power to direct how such control shall be used:
    A. By laws
    B. Proxy
    C. Voting trust agreement
    D. Certificate of stock

Answer 29

Answer: C
Voting trust agreements are agreements between a group of the stockholders of a corporation and the trustee or by a group of identical agreements between individual stockholders and a common trustee, whereby it is provided that for a term of years, or for a period contingent upon a certain event, or until the agreement is terminated, control over the stock owned by such stockholders, either for certain purposes or for all purposes, is to be lodged in the trustee, either with or without a reservation to the owners, or persons designated by them, of the power to direct how such control shall be used

Question 30

30. It is a legal arrangement wherein another person is authorized to act on behalf of another party or a format that allows a shareholder to vote without being physically present at the meeting.
    A. By laws
    B. Proxy
    C. Voting trust agreement
    D. Certificate of stock

Answer 30

Answer: B
Proxies are legal arrangements wherein another person is authorized to act on behalf of another party or a format that allows a shareholder to vote without being physically present at the meeting

Question 31

31. What is the right sequence?
    A. Declaration Date, ex date, Record date, payment
    B. Declaration date, record date, ex date, payment
    C. Record date, declaration date, ex date, payment
    D. Exdate, declaration date, record date, payment

Answer 31

Answer: A
1. Declaration date
n Announcement of record date and payment date
2. Ex date - first business day on which a share will trade without its dividend
n If holder before ex date – will receive dividends
n If holder after ex date – will not receive dividends
3. Holder of record - business day on which a shareholder that is listed in the company’s records is deemed to have ownership of the company’s shares for the purpose of deciding who can and who cannot receive a dividend when paid
4. Payment date

Question 32

32. This describes the principle that sale of a corporation’s shares must first be offered to existing shareholders before the same can be sold to third parties:
    A. Right of first refusal
    B. Doctrine of corporate interest
    C. Pre-emptive right
    D. Trust fund doctrine

Answer 32

Answer: A
Right of first refusal pertains to the sale of the shares to third parties. Must be explicitly provided in the articles and the stock certificate. It must be offered to existing stockholders before selling to third parties

Question 33

33. This pertains to the right stockholders to maintain their percentage ownership in the corporation. It is done by subscribing to any issuance or disposition of shares from the capital stock in proportion to their holdings :
    A. Right of first refusal
    B. Doctrine of corporate interest
    C. Pre-emptive right
    D. Trust fund doctrine

Answer 33

Answer: C
Pre-emptive right is the right of stockholders to maintain their percentage ownership to the corporation. It is done by subscribing to any issuance or disposition of shares from the capital stock in proportion to their holding

Question 34

34. Which of the following actions does not necessitate the voting of non voting shares:
    A. dissolution
    B. Amendment of bylaws
    C. Extension/ shortening of corporate term
    D. Merger or consolidation

Answer 34

Answer: C
1. Dissolution
2. Amendment of the articles of incorporation
3. Adoption and amendment of by-laws
4. Incurring, creating or increasing bonded indebtedness
5. Increase or decrease of capital stock
6. Investment of corporate funds in another corporation or business in accordance with this Code
7. Merger or consolidation of the corporation with another corporation or other corporations
8. Sale, lease, exchange, mortgage, pledge, or other dispositions of all or substantially all of the corporate property.

Question 35

35. Which of the following is true regarding preferred shares:
    A. Can be with preference to assets or preference to profits
    B. Cannot be deprived of voting rights
    C. Can be issued without par value
    D. Cannot participate in profits along with ordinary shares

Answer 35

Answer: A
1. Preferred
a. Preference as to:
 Asset – in case of liquidation
 Dividends – in case of profit distribution
b. Can never be no par value
c. Only class that can be deprived of voting rights

Question 36

36. Which has senior claim in a corporate dissolution?
    A. Common shares
    B. Rights
    C. Warrants
    D. Options

Answer 36

Answer: A
Rights refer to the privilege granted to existing shareholders to receive
additional shares of common stock.
Warrants are securities that entitle the holder to buy the underlying stock.
Options can be employee benefits in the form of an option given or sold by a company to give the buyer the right to buy the common shares of a company.
Since these securities can only become common shares by virtue of an exercise, they have no right to corporate assets in case of a dissolution

Question 37

37. How can a corporation raise new capital?
    A. Declare dividends out of unrestricted retained earnings
    B. Issue debt securities
    C. Issue capital
    D. All of the above

Answer 37

Answer: C
Though long term debt can be considered capital, the
presence of (A) makes (c) the best answer

Question 38

38. Which two of the following fixed-income instruments are tax free?
    I. 7 year LTNCD
    II. Bank LT2
    III. 4 year Time deposit
    IV. 3 year corporate bonds
    A. I, II, III, IV
    B. I, III
    C. I,II
    D. I,III,IV

Answer 38

Answer: C
Common Features of Tier 2 bank capital – tax free for individuals and
minimum term of 5 years

Question 39

39. You have invested PHP1,000,000 in a time deposit
    security for 3 months at 5% interest, how much gross
    interest will you earn by the end of the tenor?
    A. PHP10,000.00
    B. PHP12,500.00
    C. PHP50,000.00
    D. PHP25,000.00

Answer 39

Answer: B
1,000,000* .05* 3/12 = 12,500

Question 40

40. You have invested PHP1,000,000 in a time deposit security for 3 months at 5% interest, how much will you receive by the end of the tenor?
    A. PHP1,010,000.00
    B. PHP1,012,500.00
    C. PHP10,000.00
    D. PHP12,500.00

Answer 40

Answer: A
Principal 1,000,000.00
Interest – net of taxes
(1,000,000.003/12.05)*(.80) 10,000.00
Total amt to be received 1,010,000.00

Question 41

41. You previously bought RTB 10-1 priced at 99 when interest
    rates were at 5%. Three months later interest rates when down to
    4%, what would be the likely effect on bond prices?
    A. increase
    B. decrease
    C. Stay the same
    D. indeterminable

Answer 41

Answer: A
Law of Fixed Income: Yields and prices are always inversely
related
Bond prices increase when interest rates go down.

Question 42

42. You previously bought RTB 10-3 priced at 104 when
    interest rates were at 5%. Three months later interest rates
    when down to 4%, which of the following is true?
    A. You bought the instrument at a discount
    B. You bought the instrument at par
    C. You bought the instrument at a premium
    D. indeterminable

Answer 42

Answer: C
If the bond was bought at par, price should be 100. Anything
less than 100 is a discount and anything more is a premium

Question 43

43. Which of the following best describes the relationship
    between interest rates and bond prices?
    A. Always inverse
    B. Always direct
    C. Sometimes inverse
    D. Sometimes direct

Answer 43

Answer: A
Law of Fixed Income: Yields and prices are always inversely
related

Question 44

44. Which of the following best describes a normal yield curve?
    A. 3 mo. Rate= 3%, 6 mo. Rate= 3.2%, 12 mo. Rate = 3.5%, 24 mo.
    Rate =3.4%
    B. 3 mo. Rate= 3.3%, 6 mo. Rate= 3.2%, 12 mo. Rate = 3.5%, 24
    mo. Rate =3.4%
    C. 3 mo. Rate= 3%, 6 mo. Rate= 3.2%, 12 mo. Rate = 3.125%, 24
    mo. Rate =3.4%
    D. 3 mo. Rate= 3%, 6 mo. Rate= 3.2%, 12 mo. Rate = 3.5%, 24 mo.
    Rate =3.6%

Answer 44

Answer: D
Normal yield curve is wherein longer maturities have higher yields

Question 45

45. What is the best strategy for an investor with an outlook
    of declining interest rates?
    A. Invest in long term fixed income assets
    B. Wait further into the future for better investment outlets
    C. Invest in short term fixed income assets
    D. None of the above

Answer 45

Answer: A
Since the outlook is for interest rates to go down, it is better
to invest now in long term fixed income assets wherein
rates are higher

Question 46

46. Treasury bills are protected from what type of risk?
    A. Market risk
    B. Credit risk
    C. Inflation risk
    D. Liquidity risk

Answer 46

Answer: B
Treasury bills are issued by the government and are
therefore free from credit risk

Question 47

47. What happens to bond prices when inflation goes down?
    A. decrease
    B. increase
    C. Stay the same
    D. No relationship between the two

Answer 47

Answer: B
Law of Fixed Income: yields and prices are always inversely
related
Inflation causes interest rates to increase, a decrease in inflation would mean a decrease in interest rates.
Decrease in interest rates would mean an increase in bond prices

Question 48

48. Jose got PHP75,000 over the past 3 years on his PHP500,000.00 RTB Bond. What is the coupon rate of the RTB?
    A. 6.25%
    B. 5%
    C. 2.5%
    D. 5.17%

Answer 48

Answer: A
75,000/3 = 25,000 - interest received per year (net of taxes since RTB)
25,000/ (1-.2) = 31,250 - gross interest earned per year
31,250/500,000 = 6.25%

Question 49

49. What is not a feature that can be found in a bond?
    A. callable
    B. puttable
    C. convertible
    D. None of the above

Answer 49

Answer: D
All can be features found in a bond

Question 50

50. A bond purchased between interest payment dates is
    paid at what price?
    A. Clean price
    B. Bid price
    C. Dirty price
    D. None of the above

Answer 50

Answer: C
Dirty Price
- Price of a bond if it is bought with accrued interest

Question 51

51. It is the return an investor would get if he were to invest
    in a fixed income instrument today:
    A. Yield to maturity
    B. Current yield
    C. Interest rate
    D. None of the above

Answer 51

Answer: A
Yield to maturity
- Return an investor would get if he were to invest in
the bond today

Question 52

52. Which of the following is not a secured fixed income security?
    A. Debentures
    B. Equipment trust certificates
    C. Collateral trust bonds
    D. Mortgages

Answer 52

Answer: A
Bond Security
1. Secured
A. First mortgage
B. Collateral trust bonds
C. Equipment trust certificates
2. Unsecured
A. Debentures
B. Subordinated debenture bonds
* Usually with conversion privilege

Question 53

53. Which of the following ratings describes an investment
    grade fixed income asset?
    A. BBB-
    B. B
    C. BB+
    D. B+

Answer 53

Answer: A
Lowest investment grade is BBB-
Speculative grade is BB+ and below

Question 54

54. Which of the following does not hold true for long term
    negotiable certificates of deposit?
    A. Non redeemable
    B. Non taxable for all investors
    C. Tradable at the secondary market
    D. Cannot be used as collateral

Answer 54

Answer: B
LTNCDs are non taxable only for individual investors.
Institutional investors are taxed accordingly

Question 55

55. In general, if expected inflation is 7% but the actual figure announced by government is 11%, what happens to stock prices?
    A. Increase by 11%
    B. Decrease by 11%
    C. No change
    D. Decrease

Answer 55

Answer: D
Since actual inflation > expected inflation, stock prices will decrease because generally, stock prices usually do.

Question 56

56. If the growth rate of an economy is 6% but inflation is
    3%, and nominal interest rate is at 8%. What is the real
    growth rate of the economy
    A. 2%
    B. 4%
    C. 3%
    D. Cannot be determined

Answer 56

Answer: C
Real growth rate = nominal growth rate (6%) – inflation (3%)
= 3%

Question 57

57. What must the government do to increase employment in a country?
    A. Reduce interest rates
    B. Increase interest rates
    C. Pay off international debt
    D. Spend more for infrastructure

Answer 57

Answer: D
Fiscal Policies (C + I + G + X – M) – demand side
n Private Consumption (C)
n Investments (I)
n Government Spending (G)
n Exports (X)
n Imports (M)
To increase employment, the demand side for funds must go up, in which case increases one of the CIGX must happen. Spending for infra falls within G.

Question 58

58. What combination of BSP monetary tools would increase money supply:
    A. Sell bonds, reduce overnight rate, reduce reserve requirement
    B. Buy bonds, reduce overnight rate, reduce reserve requirement
    C. Buy bonds, increase overnight rate, increase reserve requirement
    D. Sell bonds, increase overnight rate, increase reserve requirement

Answer 58

Answer: B
Monetary Policies – Supply side
n Open Market Operations – buy and sell of government securities
n Policy Rates (RP, RRP)
n Reserve Requirements
n Moral Suasion
Buying bonds – BSP buys bonds and injects money into economy
Reduce overnight rate – less money is placed in the BSP and more into the economy
Reduce reserve requirement – less money in the reserves, more money into the economy

Question 59

59. A company has a current ratio of 1.5. Cash is used to pay off some short term debt. What happens to the ratio?
    A. Increases
    B. Decreases
    C. Stays the same
    D. Cannot be determined

Answer 59

Answer: A
Example:
Current assets (including cash) = 1,200; current liabilities = 800; cash = 200; ratio: 1.5
Current assets (including cash) = 1,000; current liabilities = 600; cash = 0; ratio = 1.67

Question 60

60. What is comprised of M2?
    I. Currency in circulation
    II. Checking accounts
    III. Savings deposits
    IV. Time deposits
    V. Promissory notes
    A. I, II
    B. I, II, IV
    C. I, II, III, IV
    D. I, II, III, IV, V

Answer 60

Answer: C
M2 = M1 + savings and time deposits
= currency in circulation + checking accounts + savings and time deposits

Question 61

61. What makes a good market?
    A. Liquid
    B. Internally efficient
    C. Externally efficient
    D. All of the above

Answer 61

Answer: D
A good market is characterized by liquidity and efficiency

Question 62

62. What is not included in M1?
    A. Time deposits
    B. Checking accounts
    C. Coins
    D. Currency

Answer 62

Answer: A
M1= currency in circulation + checking accounts

Question 63

63. At what point in the economic cycle is unemployment
    the lowest?
    A. Expansion
    B. Peak
    C. Trough
    D. Recession

Answer 63

Answer: B
Unemployment is at the lowest during the peak of an
economic cycle. Decreasing in an expansion, increasing
during recession and high during troughs.

Question 64

64. Which government agency is in charge of controlling money
    supply?
    A. BSP
    B. PSE
    C. SEC
    D. PDEx

Answer 64

Answer: A
BSP is the government agency in charge of controlling money
supply. Along with its mandate of Price Stability, Stable Banking
System and Safe and reliable payments system

Question 66

66. If the government is concerned about the economy
    overheating, what should it do?
    A. Raise interest rates
    B. Sell bonds
    C. Increase government spending
    D. Nothing, its out of their control

Answer 66

Answer: A
An economy overheats when there is too much money and activity
in the economy. Therefore decreasing money supply (supply side)
or fiscal policies (demand side) would be needed. One way to
decrease the money supply is to raise interest rates

Question 67

67. What phase of the economic cycle is marked by rising
    interest rates?
    A. Expansion
    B. Peak
    C. Trough
    D. Recession

Answer 67

Answer: A
Interest rates are rising in an expansionary stage of an
economy. High during peaks, decreasing in a recession and
low during a trough.

Question 68

68. If a company has Accounts receivable turnover of 8 and industry turnover is 24, which is false?
    A. Industry collection is longer than 45.6 days
    B. Company takes too long to collect their receivables
    C. Company takes an average of 45.6 days to collect receivables
    D. Industry takes an average of 15.20 days to collect receivables

Answer 68

Answer: A
Collection days of company = 365/8 = 45.6
Industry avg collection days = 365/24 = 15.20
Therefore on average, the company can collect its receivables at around 45.6 days

Question 69

69. Which type of index market index is biased towards high capitalization stocks?
    A. Equally weighted
    B. Price weighted
    C. Market weighted
    D. None of the above

Answer 69

Answer: C
Market weighted indices have natural bias towards high capitalization stocks. Price weighted indices have natural bias towards high priced stocks.
Equally weighted indices have a bias towards small capitalization stocks

Question 70

A company has Cash - 300, AR - 100, Inventories - 200, Prepaid expenses - 300, Office Supplies - 100, Fixed Assets - 1000, AP - 500, Mortgage Payable - 600, Bonds Payable - 300, Common Equity - 400, Preferred Shares - 100, Retained Earnings - 100

How much is the current assets?

a. 900
b. 600
c. 1000
d. 400

Answer 70

C

Question 71

A company has Cash - 300, AR - 100, Inventories - 200, Prepaid expenses - 300, Office Supplies - 100, Fixed Assets - 1000, AP - 500, Mortgage Payable - 600, Bonds Payable - 300, Common Equity - 400, Preferred Shares - 100, Retained Earnings - 100

How much is the stockholder’s equity?

a. 500
b. 600
c. 1000
d. 400

Answer 71

B

Question 72

72. M1 is consisted of:
    I. Coins in circulation
    II. Savings accounts
    III. Checking accounts
    IV. Time deposits
    V. Bills in circulation
    A. I, IV, V
    B. I, III, V
    C. I, II, III, V
    D. I, II, III, V

Answer 72

Answer: B
M1= currency in circulation + checking accounts

Question 73

73. The person employed full time by a Broker Dealer whose
    responsibilities include internal control supervision of other
    employees, agents, salesmen, officers, directors of such
    Broker Dealer for compliance with the code and rules and
    regulations is known as:
    A. Broker Dealer
    B. Salesman
    C. Trader
    D. Associated Person

Answer 73

D

Question 74

74. Under Corporate Governance Code, which 2 roles
    conflict with each other?
    A. President and corporate secretary
    B. President and treasurer
    C. Chairman and CEO
    D. All

Answer 74

Answer: C
A and B are provided for under the Corporation Code
C is provided for in the Corporate Governance Code

Question 75

75. What does SRO stand for?
    A. Securities Regulation Organization
    B. Securities Regulation Office
    C. Self-Regulating Organization
    D. Securities Registration Office

Answer 75

C

Question 76

76. Which of the following is not a practice followed in the
    markets?
    A. Broker dealers should always prioritize the orders of the
    clients ahead of their own
    B. Market participants can act on nonmaterial public information
    C. Market participants should always exercise personal judgment
    in giving recommendations to clients
    D. Insider trading is prohibited

Answer 76

Answer: C
Under professionalism, independence and objectivity, market participants should always practice professional judgment

Question 77

77. What it the capitalization requirement for a broker that deals only proprietary shares and has no custody of the same?
    A. 2.5MM
    B. 5.0MM
    C. 10.0MM
    D. None of the above

Answer 77

Answer: A
Those acquiring the business of existing broker dealer firms and will be registered in a clearing agency. But if not registered in a clearing agency, Commission may allow for lower capitalization:
2.5MM – purely proprietary shares and not holding securities

Question 78

78. It is defined as any person who engages on behalf of an issuer of securities, or itself as an issuer of securities, by: (i.) countersigning such securities upon issuance; (ii.) monitoring the issuance of such securities with a view toward preventing unauthorized issuance, a function commonly performed by a person called a registrar; (iii.) registering the transfer of such securities; (iv.) exchange or converting such securities; and/or (v.) transferring record ownership of securities by bookkeeping entry without physical issuance of securities certificates.
    A. Transfer Agent
    B. Custodian
    C. Registry
    D. Underwriter

Answer 78

A

Question 79

79. Any person or company acting as intermediary in
    making deliveries upon payment to effect settlement in
    securities transactions.
    A. Transfer Agent
    B. Salesman
    C. Registry
    D. Clearing agent

Answer 79

D

Question 80

80. A natural person, employed as such or as an agent, by a
    dealer, issuer or broker to buy and sell securities
    A. Transfer Agent
    B. Salesman
    C. Registry
    D. Clearing agent

Answer 80

B

Question 81

81. Any person who has purchased from an issuer with a
    view to, or sells for an issuer in connection with, the
    distribution of any security or participates in any such
    undertaking, but such term shall not include a person
    whose interest is limited to a commission
    A. Broker
    B. Dealer
    C. Underwriter
    D. Clearing agent

Answer 81

C

Question 82

82. If a client wishes to put an order with the intention of
    having his total order matched at the indicated price and
    withdrawn when the whole amount cannot be matched, he
    should put a/an:
    A. Iceberg Order
    B. Limit Order
    C. Fill or Kill order
    D. Fill and Kill order

Answer 82

C

Question 83

83. Which of the following information are included in the order ticket prepared by the Brokering participant?
    A. Price at which order was executed
    B. Whether solicited or unsolicited
    C. Name of salesman
    D. All of the above

Answer 83

Answer: D
A. Info needed:
I. Name of customer
II. Name of salesman
III. Execution price
IV. Solicited or unsolicited
n Customer first mentions the security – unsolicited
n Recommended by salesman – solicited
B. Execution of orders in which they are received
C. Time stamping
D. If taken by telephone
I. Recorded line that is kept for a period min of 6 months

Question 84

84. In the event a trading participant’s license to trade is suspended or revoked:
    A. Outstanding contracts of the customers will be taken over by another trading participant
    B. The SEC requires trading participants to put up margins against customer transactions
    C. Owners of the trading participant will honor the obligations to its customers
    D. All of the above

Answer 84

Answer: A
In the event a trading participant’s license to trade is suspended or revoked:
 Exchange member – arrange for a member to take over the outstanding
contracts
 Non exchange member – Commission will require transfer of account to
another broker dealer

Question 85

85. Which of the following is true?
    I. Qualified Individual Buyers have a maximum of P25MM annual gross income for at least 2 years prior to registration
    II. Qualified Institutional Buyers have a minimum of P100MM in income or at least P60MM in SEC registered securities
    III. AMLC required reporting of CTR and STR incidents within 5 days
    IV. Qualified Individual Buyers must have engaged in securities trading in either their personal capacity or through a fund manager for at least a year or held a position of responsibility in any professional or business entity that requires expertise in securities trading for at least 2 years
    V. QIB registration is valid for 3 years
    A. I, II, III, IV
    B. I, IV, V
    C. III, IV, V
    D. III, IV

Answer 85

D

Question 86

86. The following are Qualified Investor Participants except:
    A. Insurance Company
    B. Investment Company
    C. Entity with assets of more than PHP1,000,000,000.00
    D. Entity with assets of more than PHP1,200,000,000.00

Answer 86

Answer: C
Who are qualified investors:
Traditional
1. Bank;
2. Registered investment house;
3. Insurance company;
4. Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision
thereof or managed by a bank or other persons authorized by the Bangko Sentral to engage in trust functions;
5. Investment company; or
6. Any other entity with at least P1,200,000,000 in total assets
7. Such other person as the Commission may by rule determine as qualified buyers, on the basis of such factors
as financial sophistication, n

Question 87

87. How do you control the trading room? Choices are I, II, III, IV
    I. Restrict access to superstar traders
    II. Not all can be sold to client
    III. Don’t separate front, middle and back office
    IV. Risk model can’t be fully relied on
    A. I, II, III, IV
    B. I, II, IV
    C. I, III, IV
    D. I,IV

Answer 87

Answer: B
Chinese walls must exists between front, middle and back office
Client suitability must take place before anything can be sold to a client
Risk models are just models and are assumptive

Question 88

88. If a stockholder has 100 shares at PHP 60 each, he received a 10% stock dividend, which is
    true?
    A. He received 100 shares valued at PHP 60
    B. He now holds 110 shares valued at PHP 54.50 each
    C. His holdings are now worth PHP 6,600.00
    D. None of the above

Answer 88

Answer: B
Cost per share: PHP 60; Shares held: 100;
Total Cost = (PHP 60100)= PHP 6,000
Total cost per share BEFORE stock dividends = PHP 60
Shares held after stock dividends = (10010%)+100 =110
Total cost = still at PHP 6,000 (for stock dividends the cost is the same, it will just be divided among larger number of shares)
Total cost per share = PHP 6,000/110 = PHP 54.50

Question 89

89. C bought 100 shares at PHP 200 per share, in doing so he
    incurred a transaction cost of PHP 500. Which of the following is
    true?
    A. His average cost is PHP 200
    B. He can make a profit as long as he sells more than PHP 200
    C. His average cost is PHP 205
    D. He makes a profit if he sells at PHP 205

Answer 89

Answer: C
Cost per share: PHP 200; Shares bought: 100; Transaction Cost:
PHP 500
Total Cost = (PHP 200*100) + 500 = PHP 20,500
Total cost PER share = PHP 20,500/100 = PHP 205

Question 90

90. B bought 100 shares at P60 per share with 500 in transaction costs, after a while he received a notice that he will receive a 20% stock dividend. Which of the following is true?
    A. His overall holdings are now worth less
    B. His average cost is now at P65
    C. He now owns 120 shares at P54.16
    D. He should sell the stock because its now losing money

Answer 90

Answer: C
Cost per share: PHP 60; Shares held: 100; transaction cost: PHP 500
Total Cost = (PHP 60100) + 500 = PHP 6,500
Total cost per share BEFORE stock dividends = PHP 65
Shares held after stock dividends = (10020%) + 100 = 120
Total cost = still at PHP 6,500 (for stock dividends the cost is the same, it will just be divided among larger number of shares)
Total cost per share = PHP 6,500/120 = PHP 54.16

Question 91

91. C bought 100 shares at PHP 200 per share, after a while he received word that there will be a 3:1 stock split. Which of the following is true?
    A. His average cost is PHP 200
    B. He now owns a lot more shares but at PHP 66.67
    C. His can make more money because he received free shares
    D. He now owns less shares at P606.06

Answer 91

Answer: B
Cost per share = PHP 200; shares held = 100
Total cost = PHP 200*100 = PHP 20,000
After stock split, 3 shares will be given for each share held; so 100 shares will become 300 shares
Total cost = still at PHP 20,000
Cost per share = PHP 20,000/300 = PHP 66.67

Question 92

92. J received word that the company he invested in is going to close down. Which of the following is true assuming he bought ordinary shares?
    A. Ordinary shares will be paid out first
    B. Book value per share is a reliable measure of what he will get
    C. He is last in priority in terms of payments
    D. His shares are now worthless

Answer 92

Answer: C
Sequence of payments
1. Secured creditors
2. Employees – Priority creditors
3. Suppliers
4. Government
5. Unsecured external creditors
6. Shareholders
Book value per share assumes assets can be disposed a

Question 93

93. Which transactions is exempt from registering with the SEC?
    I. Evidence of indebtedness of a financial institution (duly licensed by the BSP)
    II. Evidence of indebtedness issued to the BSP under its Open Market Operations (OMO) and/or rediscounting
    operations
    III. Evidence of indebtedness issued to banks, their trust accts
    IV. Bills of exchange arising from a bona fide sale of goods and service which are distributed and/or traded by
    banks or investment houses duly licensed by SEC and BSP through an organized market
    A. I, II
    B. I, III
    C. I, III, IV
    D. I, II, III, IV

Answer 93

Answer: D
1. Evidence of indebtedness of a financial institution (duly licensed by the BSP)
2. Evidence of indebtedness issued to the BSP under its Open Market Operations (OMO) and/or rediscounting
operations
3. Evidence of indebtedness issued to banks, their trust accts
4. Bills of exchange arising from a bona fide sale of goods and service which are distributed and/or traded by
banks or investment houses duly licensed by SEC and BSP through an organized market
5. Evidence of indebtedness with the following conditions (private placements):
A. Issued to not more than 19 non institutional lenders
B. Payable to a specific person
C. Non-negotiable nor assignable
D. Not exceeding P50MM

Question 94

94. Which of the following is/are a condition/s for the exemption from registration of indebtedness of private placements?
    I. Issued to not more than 19 non institutional lenders
    II. Issued to at least 19 non institutional lenders
    III. Payable to a specific person
    IV. Non-negotiable nor assignable
    V. Not exceeding PHP 50MM
    A. I, III, IV, V
    B. III, IV, V
    C. II, III, IV, V
    D. I, II, III, IV, V

Answer 94

Answer: A
Evidence of indebtedness with the following conditions (private placements):
A. Issued to not more than 19 non institutional lenders
B. Payable to a specific person
C. Non-negotiable nor assignable
D. Not exceeding P50MM

Question 95

95. Which of the following statements are true?
    I. Brokering participants can only trade for clients
    II. Dealing participants can only trade for the firm’s account
    III. Deals for both brokering and dealing clients are be entered on the same terminal
    IV. Dealing participants can trade both client and firm accounts
    A. III, IV
    B. I, II
    C. II, IV
    D. I, II, IV

Answer 95

Answer: B
Dealing participants must only buy and sell securities for its own account.
Brokering participants must only buy and sell securities for the account of its customers
Dealing terminal – exclusively used for trades for its own account
Sales terminal – exclusively for trades for the account of its customers

Question 96

96. Which of the following statement is true?
    A. Qualified investor can directly buy in the OTC markets
    B. Qualified investor can deal with both dealers and non qualified investors
    C. Qualified investor can only deal with dealers
    D. Qualified investor can deal with both brokers and dealers

Answer 96

Answer: D
Qualified vs. Unqualified
1. Qualified can directly buy or sell security in an OTC market
2. Unqualified can only transact through an authorized broker or a registered/chartered collective investment scheme
3. Qualified and unqualified cannot deal with each other, it has to be through a broker
4. Dealer has to determine with reasonable effort that the other dealer is
authorized to participate in an OTC

Question 97

97. You want to invest in RTB 10-3. You were given the following
    choices by the branch manager:
    RTB 10-3 101-101.25
    Which of the following is true?
    A. You can buy RTB 10-3 at 101.25
    B. You can buy RTB 10-3 at 101
    C. Both are correct
    D. None are correct

Answer 97

Answer: A
Price takers buy at the offer (101.25)

Question 98

98. A client walks into the branch and buys a treasury bill priced at 95. However, because the client was rushing to go to the mall, he was not able to sign the buy confirmation. Luckily, the branch manager had the client’s mobile no., client did not want to go back to the branch later that day but just committed to go back the next day to sign the documents. Which of the following are true?
    A. Transaction is in violation of SRC
    B. Confirmations should be done during normal office hours on the day of the transaction
    C. No violation was incurred as client will sign the documents the next day
    D. A and B

Answer 98

Answer: D
Confirmation is normally during office hours and on day of transaction
n If confirmation is via facsimile or email – next business day 12noon

Question 99

99. A prospective client walks into a branch and wants to open an NROSS account to trade treasury bills. The client is highly knowledgeable about the markets and worries that prices will move quickly. The branch manager then proceeded with the buy transaction and asked the client to sign the documents after the transaction was concluded. Which of the following is true?
    A. No violation as the client is knowledgeable of the risks he took in the transaction
    B. There is a violation since a written agreement should be provided before any service is rendered
    C. No violation was incurred as client signed all the relevant documents
    D. None of the above

Answer 99

Answer: B
There must be a written agreement before entering into any service to be provided

Question 100

100. Which of the following is true?
     A. Dealers can only buy and sell for its own account
     B. Brokers can only buy and sell for the account of its customers
     C. Trades for dealers and brokers should be entered on different terminals
     D. All of the above

Answer 100

Answer: D
Dealing participants must only buy and sell securities for its own account.
Brokering participants must only buy and sell securities for the account of its
customers
Dealing terminal – exclusively used for trades for its own account
Sales terminal – exclusively for trades for the account of its customers

Question 101

101. Which of the following is true?
     A. A trader can execute trades for both the account of the trading participant and customers
     B. The same officers must directly supervise both the actions of salesmen and traders
     C. Salesmen can accept trade confirmations on the customers’ behalf if the client cannot do so immediately
     D. None of the above

Answer 101

Answer: D
Dealing participants must only buy and sell securities for its own account.
Brokering participants must only buy and sell securities for the account of its customers
Different officers that directly supervise and are accountable for the actions of the salesmen and traders
Employee or salesman ARE NOT authorized to accept confirmation for or on behalf of a customer

Question 102

102. Customer statements should be sent out:
     A. Weekly
     B. Daily
     C. Monthly
     D. Quarterly

Answer 102

Answer: C
Monthly statements
n Securities positions
n Money balances
n Account activity

Question 103

103. The following are true for registries except for:
     A. BSP Accredited bank
     B. Appointed by the investor
     C. Appointed by the issuer
     D. Monitors transfer of ownership

Answer 103

Answer: B
Registries
n Other than the Bureau of Treasury
n BSP accredited bank
n Appointed by the issuer
n Maintains security registry book
n Monitors transfer of ownership
n Issues registry confirmation to buyers

Question 104

104. Which concept applies to performance presentation for
     clients:
     A. Fair
     B. Accurate
     C. Complete
     D. All of the above

Answer 104

Answer: D
Performance presentation must be fair, accurate and
complete

Question 105

105. Suitability is most concerned with the study of the
     customers’:
     A. Situation
     B. Needs
     C. A & B
     D. none of the above

Answer 105

Answer: C
Suitability: Reasonable grounds based on customer
situation and needs

Question 106

106. Which of the following applies to record keeping of client information?:
     A. Records should be kept for a minimum of 5 years
     B. Records should be kept in the Philippines
     C. True and full identity of beneficial owners must be established
     D. All of the above

Answer 106

Answer: D
Record retention is for a minimum of 5 years
Records should be kept in the Philippines
Identity, address and contact details of person that stands to gain economic benefit/bears economic risk, especially in discretionary accounts (establish beneficial interest)

Question 107

107. Qualified individual buyers must have:
     I. Experience in the securities trading for at least one year either in a personal or professional capacity
     II. Personal net worth of at least PHP20MM
     III. SEC registered portfolio of at least PHP30MM
     A. I
     B. I, II
     C. II, III
     D. I,II,III

Answer 107

Answer: A
Qualified Individual Buyer (QIB)
1. Minimum annual gross income of PHP 25MM for at least 2 years prior to registration or
2. SEC registered portfolio of at least PHP 10MM or
3. Personal net worth of at least PHP 30MM
AND
1. Engaged in securities trading either in personal capacity or through a fund manager for at least one year or
2. Held a position of responsibility in any professional or business entity that requires expertise in securities trading for at least 2 years
3. 2 year validity

Question 108

108. A client has invested in fixed income security other than his own local currency. Which of the following risks should he be concerned about:
     I. Sovereign Risk
     II. Market Risk
     III. Currency Risk
     IV. Liquidity risk
     A. I, III
     B. I, II
     C. I, II, III
     D. I, II, III, IV

Answer 108

Answer: D
Client is invested in a fixed income security (market and liquidity) of another country (sovereign risk) in the currency of the foreign country (currency risk)

Question 109

109. The return on long term corporate bonds is higher than the
     return on long term treasury bonds as a result of:
     A. Credit risk
     B. Market risk
     C. Liquidity risk
     D. Political risk

Answer 109

Answer: A
Since the term of the bonds are identical (both long term), there is
no compensation for the difference in horizon, since there isn’t
any. Therefore the return premium the corporate bonds offer must
be from the assumption of credit risk.

Question 110

110. What should be considered in constructing a client’s portfolio?
     A. Risk return profile
     B. Liquidity needs
     C. Time horizon
     D. All of the above

Answer 110

Answer: D
Things to consider for a client portfolio:
1. Risk return profile
2. Liquidity
3. Legal and regulatory circumstances
4. Time Horizon
5. Taxes
6. Unique Circumstances

Question 111

111. A 70-year old client wants to buy a 25 year corporate bond,
     which of the following constraints show a mismatch?
     A. Risk return profile
     B. Liquidity needs
     C. Time horizon
     D. All of the above

Answer 111

Answer: C
Client will be 105 years old by maturity of the bond. This would
present a mismatch in time horizon as the client would probably
not need an investment of such long term horizon.

Question 112

112. It is defined as the risk that assets in a portfolio might be too
     focused on a specific asset class or security providing limited
     diversification of risk.
     A. Concentration risk
     B. Longevity risk
     C. Market risk
     D. All of the above

Answer 112

Answer: A
Concentration risk is the risk that the assets in a portfolio might be
too focused or concentrated in a specific asset class

Question 113

113.
I. In investing, all effort must be exhausted to eliminate risk
II. In investing, smart calculated risks are taken to yield optimal return
III. In portfolio management, return objectives should define the portfolio composition
A. Statement I is true; statement II is true; statement III is true
B. Statement I is false; statement II is true; statement III is false
C. Statement I is false; statement II is false; statement III is false
D. Statement I is true; statement II is false; statement III is true

Answer 113

Answer: B
In investing, taking good risk - reward opportunities are taken to get good return. In doing so, risks must be calculated to avoid large losses. Therefore, risk and reward must be taken into account when defining portfolio composition.

Question 114

114. When should portfolio composition be revisited?
     A. Change in the risk and reward profile of the client
     B. Change in the constraints that were initially set
     C. Annually
     D. All of the above

Answer 114

D

Question 115

115. There have been news speculation that a positive news will be
     released and will affect the stock price of ABC Corporation. Upon
     hearing this, a customer placed an order amounting to 50% of his
     life savings into buying the stock. Shortly thereafter, the stock
     price soared and the client was very happy. Which of the following
     is true?
     A. Client was not investing
     B. Client was gambling his funds in the stock market
     C. Broker should have taken time to advise the client of the risks
     he’s taking
     D. All of the above

Answer 115

D

Question 116

116.
I. Client work
II. Preferred age of retirement
A. I is needed for the construction of a portfolio
B. I and II are needed for the construction of a portfolio
C. I and II not needed for the construction of a portfolio
D. II is needed for the construction of a portfolio

Answer 116

Answer: B
Both are needed information for the proper profiling of the client. It is prudent to not give the portfolio more exposure to the industry the client is working in

Question 117

117. How many days does a covered institution have to report its
     covered and suspicious transactions?
     A. Covered transactions= 5 days; suspicious transactions = 10 days
     B. Covered transactions= 3 days; suspicious transactions = 5 days
     C. Covered transactions= 5 days; suspicious transactions = 5 days
     D. Covered transactions= 1 day; suspicious transactions = 3 days

Answer 117

Answer: C
Reporting for both CTR and STR is 5 days from occurrence

Question 118

118. Which of the following transactions should merit a suspicious transaction report?
     A. Transaction was to donate to the National Rice Authority
     B. Client deposited a PHP 10MM check, average amounts of the client’s check is PHP 8MM
     C. Client deposits 1,000 checks worth PHP200,000 each
     D. Client received an inheritance sum from his grandparents

Answer 118

Answer: C
STR Criteria:
1. No underlying legal or trade obligation, purpose or economic justification
2. Client is not properly identified
3. Amount is not commensurate with business or financial capacity
4. Taking into account all known circumstances, it may be perceived that the transaction was structured to avoid being reported under AML law
5. Transaction that deviates from the profile of the client and /or past transactions
6. Transactions related to unlawful activity or offense

Question 119

119. Which of the following describes a covered transaction?
     A. A transaction of cash or other equivalent in excess of PHP
     500,000.00
     B. No underlying legal or trade obligation, purpose or economic
     justification
     C. Transactions related to unlawful activity or offense
     D. Amount is not commensurate with business or financial
     capacity

Answer 119

Answer: A
CTR: transaction of cash or other equivalent money instrument in
excess of PHP 500,000.00 a day

Question 120

120. Which of the following is a covered institution?
     A. Banks and all other entities, including their subsidiaries and affiliates, supervised and regulated by the BSP
     B. Insurance companies and all other institutions supervised or regulated by the BSP
     C. Securities dealers, pre-need companies, foreign exchange corporations and other entities supervised or regulated by the SEC
     D. All of the above

Answer 120

Answer: D
Covered Institutions
1. Banks and all other entities, including their subsidiaries and affiliates, supervised and regulated by the BSP
2. Insurance companies and all other institutions supervised or regulated by the BSP
3. Securities dealers, pre-need companies, foreign exchange corporations and other entities supervised or regulated by the SEC