BM2004

NAME: MALINAO, CHATTY BSA 3 -1A DATE: SCORE:

TASK PERFORMANCE (44 points)

TRUE OR FALSE (10 items x 1 point)

Identify whether the given item is TRUE or FALSE. SHADE the corresponding circle for the correct answer.

T F
1. The financial market refers to channels or places where funds and financial instruments
such as stocks, bonds, and other securities are exchanged between willing individuals or
entities.
2. Borrowers and lenders are also known as surplus economic units and deficit economic units,
respectively.
3. The secondary market is a type of financial market wherein fund demanders such as
corporations or government agencies raise funds through new issuance of financial
instruments.
4. The issuer of financial security does not directly benefit from secondary trades as the
transaction is between the previous holder of the bond to another buyer.
5. All types of financial markets offer financial instruments with a similar degree of liquidity.

6. Limited public offer is usually used for issuance of treasury bills, bonds, and other securities
issued by the government and are commonly executed exclusively with market makers.
7. The auction occurs when the issuers are open to receive bids for their securities at all times.
8. In a dealer market, the buyer and the seller are brought together by a broker and the trade
occurs.
9. A public offering is done by issuing a prospectus or placing a document which contains an
offer to the general public to purchase or subscribe to securities at a stated price
10. Underwriting means that the investment banks guarantee the price for the securities of the
issuing company, and then sell them to the general public

MULTIPLE CHOICE (10 items x 1 point)

ENCIRCLE the letter of the correct answer among the given choices
1. The sector of the financial system where the financial instruments traded will mature or be redeemed
in one year or less from the date of issuance.
a. Debt Market c. Equity Market
b. Short – term Market d. Money Market
2. All of the following are elements of a financial system, EXCEPT:
a. Financial Market c. Financial Instruments
b. Regulatory Environment d. Insurance Commission

01 Task Performance 1 *Property of STI

Page 1 of 3
 BM2004

3. In this route of fund flows, the borrowing activity between both parties still happens indirectly
through the intervention of a financial intermediary.
a. Indirect Financing c. Indirect Funding
b. Direct Funding d. Direct Financing
4. Which of the following is NOT an economic function of the secondary market?
a. Implementation of fiscal policy c. Liquidity
b. Reduction in transaction cost d. Price Discovery
5. The market structure where the buyers and sellers propose their price through their brokers who
convey the bid in a centralized location.
a. Quote – Driven Market c. Secondary Market
b. Auction d. Order – Driven Market
6. It gathers funds from lenders and redistributes them to borrowers through an investment vehicle like
loans.
a. Financial Market c. Financial Intermediary
b. Primary Market d. Regulatory Environment
7. This is also known as a limited offer.
a. Private Placement c. Public Placement
b. Money Market Placement d. Capital Market Placement
8. Which of the following is a source of long-term funds used by the business?
a. Rent c. Interest
b. Wages d. Capital
9. In this route, the borrower – spenders deal directly with lenders through selling financial
instruments (or securities).
a. Direct Financing c. Indirect Financing
b. Direct Funding d. Indirect Funding
10. Broker and Dealer Markets are classification of Financial Market based on?
a. Financial Intermediaries c. Market Type
b. Instruments Traded d. Country’s Perspective

CASE ANALYSES (12 items x 2 points)

Determine the elements of a financial system in each given case. Write your answer in the table provided.

1. Premium Paper Corporation is a large creditworthy company operating in Compostela Valley, Davao
De Oro. It is an export-oriented unit dealing with exclusive embroidered paper. Last week, a typhoon
hit the valley which flooded the area. Many craftsmen and workers have been dislocated and raw
materials have been destroyed. As a result, the firm is unable to get an uninterrupted supply of raw
materials, and its production cycle increased. Moreover, the suppliers of raw materials who were
selling on credit earlier are now asking the company for advance payment or cash payment on
delivery. The company is now facing a liquidity crisis. To mitigate the risk the company is facing, the
Chief Financial Officer (CFO) of the company raised P20,000,000 by agreeing with Banco De Oro, an
investment bank, to issue a banker’s acceptance on Premium Paper’s suppliers. Banco de Oro complies
with the minimum capital ratio required by the Bangko Sentral ng Pilipinas (BSP); thus, they may issue
the said acceptance.

01 Task Performance 1 *Property of STI

Page 2 of 3
 BM2004

Elements:
1. Lender
2. Borrower
3. Financial Intermediary
4. Financial Instrument
5. Financial Markets
6. Regulatory Environment
Banco De Oro
Premium Paper Corporation
Issue a banker’s acceptance /BDO
P20,000,000 Cash Payment
Investment Bank/BDO
Bangko Sentral ng Pilipinas

2. Dairy Incorporation is one of the leading manufacturers and marketers of dairy-based products in the
country. In the initial years of its operations, it is only restricted to the collection and distribution of
milk. However, over the years, it has gained a reasonable market share by offering a diverse range of
dairy-based products including fresh milk, flavored yogurt, ice creams, buttermilk, cheese, milk
powders, etc. To raise capital in financing its expansion plans, Dairy Incorporation has decided to
approach the capital market by initially offering its shares in the public through the Philippine Stock
Exchange (PSE) and by issuing a 5-year bond with a par value of P10,000,000 through Philippine
National Bank (PNB), an underwriter. The company complied with all the requirements imposed by
the Securities and Exchange Commission (SEC) and Bangko Sentral ng Pilipinas (BSP).

Elements:
1. Lender
2. Borrower
3. Financial Intermediary
4. Financial Instrument
5. Financial Markets
6. Regulatory Environment
Capital Market
Dairy Incorporation
Philippine Stock Exchange
5-year Bond with Par Value of P10,000,000
Philippine National Bank
Securities and Exchange Commission and BSP

01 Task Performance 1 *Property of STI

Page 3 of 3