READ THE INSTRUCTIONS:

I. Please put in a one whole quizsheet, and indicate the your section’s time, exapmle 8:OO-9:OO.
II. Pass anytime on July 24 to your teacher. Answers for this quiz shall be provided on the same day,
7:OOpm
III. Though working as a group is good, please refrain from asking everything from your classmates because
this may help you in your example through understanding every question.
IV. Despite your busy schedule, always put your eyes on the price. Remember that all of you are intelligent.
Bless you all, future CPAs. :)

Multiple Choice
Fundamentals of Stock Analysis
1. The price/earnings (P/E) ratio represents the degree of confidence that investors have in the firm’s future
performance.
A. True
B. False

2. In buying stocks, one must also consider qualitative factors, which includes Price-Earnings Ratio,
Market-to-Book Ratio and even return of investment ratio.
A. True
B. False

3. Top-Down approach in fundamental analysis considers first the economic condition then, industry the the
condition of a company, before one should buy a stock.
A. True
B. False

4. Before buying a stock, one must know first the the law and recent news involving new bylaws of a land because
such information might affect the company as well as stock prices. What external factor is this?
A. Competition C. Industry
B. Regulations D. Growth in the industry

5. Financial analysists believe that the stock price of does not reflect its true value. Thus, they compute and analyze
information that might affect this value. What value do financial analysts refer?
A. Intrinsic Value C. Par Value
B. Piece-Meal Value D. Core Value

6. Muzzle Corporation had pretax profits of P1.2 million, an average tax rate of 34 percent, and it paid preferred
stock dividends of P50,000. There were 100,000 shares outstanding and no interest expense. What were Candy
Corporation’s earnings per share?
A. P3.91 C. P4.52
B. P7.42 D. P7.59

7. A firm had the following accounts and financial data for 2019:

Sales revenue P3,060 Cost of goods sold P1,800

Accounts receivable 500 Preferred stock dividends 18
Interest expense 126 Tax rate 40%
Total operating 600 Number of common shares 1,000
expenses
Accounts payable 240  outstanding

The firm’s earnings per share, rounded to the nearest cent, for 2019 was ______.
A. P0.53 C. P0.51
B. P0.32 D. P0.30

8. Peyk Corporation had pretax profits of P1.2 million, an average tax rate of 34 percent, and it paid preferred
stock dividends of P50,000. There were 100,000 shares outstanding and no interest expense. What were Candy
Corporation’s earnings per share? If problem looks like this, please deduct the tax rate first, then deduct stock
dividends paid to the preffered stockholders.
A. P3.91 C. P4.52
B. P7.42 D. P7.59

9. What is the market price of a share of stock for a firm with 100,000 shares outstanding, a book value of equity of
P3,000,000, and a market/book ratio of 3.5?
A. P8.57 C. P85.70
B. P30.00 D. P105.00

10. On December 31, 2006 and 2007, Renegade Corporation had 100,000 shares of common stock and 50,000
shares of noncumulative and nonconvertible preferred stock issued and outstanding.
Additional information:
Stockholders’ equity at 12/31/07 P4,500,000
Net income year ended 12/31/07 1,200,000
Dividends on preferred stock year ended 12/31/07 300,000
Market price per share of common stock at 12/31/07 144
The price-earnings ratio on common stock at December 31, 2007, was
A. 10 to 1 C. 14 to 1
B. 12 to 1 D. 16 to 1
Mortgage Market
1. The commercial mortgages, farm mortgages and home mortgages are categories of
A. swapped mortgages C. sovereign mortgages
B. secondary mortgages D. primary mortgages

2. The primary mortgages involve

A. three institutions C. single investor
B. multiple investor D. multiple institutions

3. The ownership of mortgaged property will be transferred to financial institution if the

A. borrower defaults C. borrower does not default
B. borrower want less rate D. borrower want profit

4. The loan which is made available for businesses or individuals to buy land, home or other property is classified
as
A. secondary loan C. primary loan
B. Mortgages D. swapped mortgages

5. The mortgages used to purchase the townhouses and apartment complexes are classified as
A. multi mortgage C. multifamily dwelling mortgages
B. sovereign dwelling mortgages D. primary dwelling mortgages

6. The mortgages used to purchase the shopping malls and office buildings are classified as
A. developed mortgages C. dwelling mortgages
B. commercial mortgages D. non-commercial mortgages

7. Which of the following are not considered money market securities?

A. Treasury bills C. mortgage-backed securities
B. negotiable certificates of deposit D. commercial paper

8. Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Even though
the nominal rate for the mortgage appears high, the real cost of borrowing the funds is -1%. , under this
circumstance it would be reasonable to make this purchase.
A. Yes
B. No

9. Adjustable rate mortgages

A) protect households against higher mortgage payments when interest rates rise.
B) keep financial institutionsʹ earnings high even when interest rates are falling.
C) benefit homeowners when interest rates are falling.
D) generally have higher initial interest rates than on conventional fixed-rate mortgages.

10. Amalia loaned 3Million to build her dream house. The 3 years before she could finally pay up her principal,
with a balance of 1.1Million, she borrowed 1.1Million to pay for her mortgage. This scenario is
A. Adjustable-rate mortgage C. Fix-rate mortgage
B. Mortgage Refinancing D. Discounting of Mortgage

11. When is PMI (Private Mortgage Insurance) required?

A. Only in certain states with PMI laws.
B. On some home loans with a down payment less than 20 percent.
C. On all home loans.
D. When credit rating of the borrower is below the acceptable limit

12. Mortgage payments are _____ on a 15 year fixed rate mortgage than on a 30 year fixed rate mortgage, and
_____ is paid on a 15 year mortgage than on a 30 year mortgage, ceteris paribus
A. Higher; less interest
B. Higher; higher interest
C. Lower; less interest
D. Lower; higher interest rate

13. Over recent years, many home mortgages have been ______________. This means that the mortgage loans are
pooled, and bonds are issued against the mortgage loan payments represented in the pool
A. Securitized C. Loaned
B. Controlled D. Repossessed

14. We've encountered so-called "subprime" loans, which have been especially newsworthy over the last year or
two. These are:
A. securitization of mortgage loans. C. loans to higher-risk borrowers
B. Lender; borrower D. collateralized mortgage obligation

15. A occurs when a financial institution originates a mortgage and sells it with or without
recourse to an outside buyer.
A. Mortgage Sale C. Mortgage
B. Collateral D. Securitization

16. There are three major types of mortgage-backed securities, except

A. pass-through security C. collateralized mortgage obligation (CMO)
B. Mortgage backed bond D. Conventional Backed Bonds
17. Interest rates on jumbo mortgages are generally higher than on conforming mortgages(in line with the
mortgage guidelines in a country) but conforms with high credit quality.
A. True
B. False

18. Which of the following arrangement is correct if we shall arrange it from least risky to most risky for lenders,
considering the borrowers invovled?
A. Prime, Alt-A, Subprime C. Alt-A, Prime, Subprime
B. Subprime, Prime, Alt-A D. Prime, Subprime, Alt-A

19-20. Assuming that you applied for a fixed-rate mortgage for a total of 1.5Million because you want to own a
farm in your province. Compute of the monthly amortization, payable every end of the month for 15 years, if the
prevailing interest rate upon application of loan is 15%.

Foreign Exchange Market

1. Markets in which cash flows from the sale of products or assets denominated in a foreign currency are
transacted.
A. Deriative Market C. Foreign Exchange Market
B. Hedge Market D. Mortgage Market

2. The larger fluctuations in portfolio value of foreign exchange of financial institutions leads to
A. greater liquidity of assets C. greater volatility of rates
B. lesser volatility of rates D. lesser liquidity of assets

3. The services such as commercial trade transactions and positions in financial investments provided by financial
institutions are classified as
A. trade services C. investment services
B. agent services D. commercial services

4. The position which came in to existence because of holding assets less than liabilities is considered as
A. net surplus in assets C. net surplus in liabilities
B. net long in currency D. net short in currency

5. Currency depreciation is when a country’s currency falls in value relative to other currencies, meaning the
country’s goods become cheaper for foreign buyers and foreign goods become more expensive for foreign sellers.
Currency appreciation is when a country’s currency rises in value relative to other currencies, meaning that the
country’s goods are more expensive for foreign buyers and foreign goods are cheaper for foreign sellers.
A. True
B. False
6. The relationship that links spot exchange rates, interest rates, and forward exchange rates is described as the
interest rate parity theorem (IRPT).
A. True
B. False

7. This rate is the price at which one currency, example the Philippine Peso, can be exchanged for another
currency, example Mexican Peso
A. Foreign Rate C. Derivative Rate
B. Sport Rate D. Foreign Exchange Rate

8. Everything else constant, a stronger dollar will mean that

A. vacationing in England becomes more expensive.
B. vacationing in England becomes less expensive.
C. French cheese becomes more expensive.
D. Japanese cars become more expensive.

9. An agreement to exchange dollar bank deposits for euro bank deposits in one month is a
A. spot transaction. C.future transaction.
B. forward transaction. D. deposit transaction.

10. Today $1.00 can be purchased for P52.25. This is the

A. spot exchange rate. C. forward exchange rate
B. fixed exchange rate. D. financial exchange rate.