6/1/2021 Q#2 ACTFMKT 2021-2: [1202_ACTFMKT_K31] - FINANCIAL MARKETS

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This quiz has been regraded; your score was affected.

Q#2 ACTFMKT 2021-2

Due
Mar 30 at 19:45
Points
50
Questions
35
Available
Mar 30 at 17:45 - Mar 30 at 19:45
about 2 hours
Time Limit
120 Minutes

Instructions
This quiz covers topics 2.1-2.3 and  have a total of 50 points. It has 10 T/F questions, 10 MC questions and 15 (2 pts. each)  problem solving questions.  Since this is an online quiz, you can open your notes
while taking the quiz and even use excel in the computation.

For problem solving questions, do not round-off in between calculation and round-off final answers to 2 decimal places unless otherwise stated in the question.  All answers in percentage should be entered in
their decimal form up to 4 decimal places (e.g. 2.33% should be entered as 0.0233). 

No partial points will be given since this is open-notes  and there are no solutions required.

Only answers submitted in the online quiz will be considered. Please double check final answers encoded because the following corrections shall not be reconsidered:

Non-compliance with quiz instructions (e.g. failure to express percentage answers in their decimal form or answer entered was more than or less than the number of decimal places required)
Encoding error (slide error, transposition error, etc.) 
Rounding-off error (error in rounding-up or rounding-down) 

You may message me via Canvas if you have any clarifications about the quiz questions. Please also open our announcement section because I will post there the corrections or clarifications (if any) during the
quiz.

This quiz was locked Mar 30 at 19:45.

Attempt History
Attempt Time Score Regraded
LATEST Attempt 1
120 minutes 45 out of 50 50 out of 50

Score for this quiz:

50 out of 50
Submitted Mar 30 at 19:45
This attempt took 120 minutes.

Question 1 1
/ 1 pts

A commercial paper is a financial instrument where a bank guarantees a future payment to a firm.

 
True

Correct!  
False

Question 2 1
/ 1 pts

Stripped bonds are bonds whose cash flows have been transformed into a security representing the principal payment only and a security representing
interest payments only.​

Correct!  
True

 
False

Question 3 1
/ 1 pts

Eurobonds are long-term bonds issued and sold outside the country of the currency in which they are denominated.

Correct!  
True

 
False

Question 4 Original Score:

0
/ 1 pts
Regraded Score:
1
/ 1 pts


This question has been regraded.

If a financial institution prefers to retain its mortgages in its balance sheet, it should issue mortgage-backed bonds rather than a pass-through securities.

Correct!  
True

 
False

Question 5 1
/ 1 pts

Money market securities that do not offer coupon payments but are sold at a discount from par value are quoted using discount yield.

Correct!  
True

 
False

Question 6 1
/ 1 pts

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A balloon-payment mortgage requires interest payments for a three- to five-year period. At the end of this period, full payment of the principal (the balloon
payment) is required.

Correct!  
True

 
False

Question 7 1
/ 1 pts

T-bills must offer a premium above the negotiable certificate of deposit (NCD) to compensate for less liquidity and safety.

 
True

Correct!  
False

Question 8 1
/ 1 pts

All of the bonds issued by a particular company will have the same maturity, price, and credit rating.​

 
True

Correct!  
False

Question 9 1
/ 1 pts

Yield spread is the risk premium component of the yield-to-maturity.

Correct!  
True

 
False

Question 10 1
/ 1 pts

Discount points are designed to reduce the likelihood of default on mortgage loans.

 
True

Correct!  
False

Question 11 1
/ 1 pts

Standard revenue bonds are 

 
backed by the Bureau of Treasury

 
backed by the full taxing authority of the municipality

Correct!  
collateralized by the earnings from a specific project

 
bonds backed by mortgages

Question 12 1
/ 1 pts

At any given time, the yield on commercial paper is ____ the yield on a T-bill with the same maturity.

 
substantially less than

 
slightly less than

 
equal to

Correct!  
slightly higher than

Question 13 1
/ 1 pts

For any given interest rate, the shorter the life of the mortgage, the ____ the monthly payment and the ____ the total payments over the life of the mortgage.

Correct!  
greater; lower

 
lower; lower

 
lower; greater

 
greater; greater

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Question 14 1
/ 1 pts

Which of the following mortgages allows the home purchaser to obtain a mortgage at a below-market interest rate throughout the life of the mortgage?

 
growing-equity mortgage

Correct!  
shared-appreciation mortgage

 
second mortgage

 
graduated-payment mortgage

Question 15 1
/ 1 pts

A negotiable Certificate of Deposit

Correct!  
is a bank-issued time deposit

 
is a registered instrument

 
is a corporation-issued security

 
does not pay interest

Question 16 1
/ 1 pts

An adjustable-rate mortgage increases interest rate risk for the ____,  but reduces interest rate risk for the ____.

Correct!  
borrower; originator

 
government; originator

 
originator; borrower

 
borrower, government

Question 17 1
/ 1 pts

The accrued interest owed to the bond seller ________ as the period from date of last coupon date to transaction date ________.

 
remain the same, increases

Correct!  
increases, increases

 
remain the same, decreases

 
decreases, increases

Question 18 1
/ 1 pts

Characteristics of mortgage include the following EXCEPT:

 
down payment

 
maturity of 15 or 30 years

Correct!  
convertible

 
collateral

Question 19 1
/ 1 pts

The main difference between a NINA loan and a NINJA loan is:

 
one requires asset disclosure

 
one requires income disclosure

 
one is classified as prime mortgage

Correct!  
one requires verification of employment

Question 20 1
/ 1 pts

If a firm has large enough quantities of money which may be needed by operations in the short-run, the money may be invested in:

Correct!  
money market securities

 
stocks

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mortgage market securities

 
bonds

Question 21 2
/ 2 pts

Assume investors require a 5.8% annualized return (id) on a six-month T-bill with a par value of P10,000. The price investors would be willing to pay is ____.

Correct!
9,710

Correct Answer 9,710

Question 22 0
/ 2 pts

22-23.) On January 30, 2021, you purchased a P100,000 T-note that matures on December 31, 2030 (settlement occurs two days after purchase, so you
receive actual ownership of the bond on February 1, 2021). The coupon rate on the T-note is 6%. The last coupon payment occurred 124 days before
settlement and the next coupon payment will be paid on March 31, 2021.

Calculate the accrued interest due to the seller from the buyer at settlement.

You Answered
2,032.79

Correct Answers 2,043.96 (with margin: 0)

Question 23 0
/ 2 pts

22-23.) On January 30, 2021, you purchased a P100,000 T-note that matures on December 31, 2030 (settlement occurs two days after purchase, so you
receive actual ownership of the bond on February 1, 2021). The coupon rate on the T-note is 6%. The last coupon payment occurred 124 days before
settlement and the next coupon payment will be paid on March 31, 2021.

If you paid the seller P109,544, how much was the clean price of the T-note?

You Answered
107,511.21

Correct Answer 107,500.04

Question 24 2
/ 2 pts

A repurchase agreement calls for an investor to buy securities for P4,925,000 and sell them back in 75 days for P5,000,000. What is the yield (iMM)?

Indicate your final answer in decimal form with 4 decimal places  (e.g. 3.22% should be entered as 0.0322)

Correct!  
0.0731

Question 25 2
/ 2 pts

25-27.) You plan to purchase an automobile for a price of P1,900,000 using a 10-year mortgage obtained from your local bank. You will make a downpayment
of 20% of the purchase price. You do not plan to pay off the mortgage early. You bank offers you the following options:

Option 1: Mortgage rate of 8% and 2 points

Option 2: Mortgage rate of 7.7% and 5 points

How much does it cost to obtain a lower interest rate on the mortgage? Compute for the discount fee differential.

Correct!
45,600

Correct Answers 45,600 (with margin: 0)

Question 26 2
/ 2 pts

25-27.) You plan to purchase an automobile for a price of P1,900,000 using a 10-year mortgage obtained from your local bank. You will make a downpayment
of 20% of the purchase price. You do not plan to pay off the mortgage early. You bank offers you the following options:

Option 1: Mortgage rate of 8% and 2 points

Option 2: Mortgage rate of 7.7% and 5 points

Compute for the monthly savings of choosing option 2.

Correct!
240.07

Correct Answers 240.07 (with margin: 0)

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Question 27 2
/ 2 pts

25-27.) You plan to purchase an automobile for a price of P1,900,000 using a 10-year mortgage obtained from your local bank. You will make a downpayment
of 20% of the purchase price. You do not plan to pay off the mortgage early. You bank offers you the following options:

Option 1: Mortgage rate of 8% and 2 points

Option 2: Mortgage rate of 7.7% and 5 points

Which option should you choose if you can reinvest monthly savings at 3%? Indicate the net savings (in present value) of the better option

Correct!
20,738.29

Correct Answers 20,738.29 (with margin: 0)

Question 28 2
/ 2 pts

An investor purchased a convertible bond that will mature in 5 years. The Z-spread of the bond is 7.913% and option cost is -0.515%. Compute for the option-
adjusted spread (OAS).

Indicate your final answer in basis points with 2 decimal places

Correct!
842.8

Correct Answers 842.8 (with margin: 0)

Question 29 2
/ 2 pts

29-30.) An investor is considering to purchase a six-month (182 days) negotiable certificate of deposit with a yield (iMM) of 6.20%. He wants to compare this
investment with other investments available.

Compute for the bond equivalent yield of the negotiable certificate of deposit. Indicate your final answer in decimal form with 4 decimal places  (e.g. 3.22%
should be entered as 0.0322)

Correct!
0.0629

Correct Answers 0.0629 (with margin: 0)

Question 30 2
/ 2 pts

29-30.) An investor is considering to purchase a six-month (182 days) negotiable certificate of deposit with a yield (iMM) of 6.20%. He wants to compare this
investment with other investments available.

What is the equivalent annual return of the negotiable certificate of deposit? Indicate your final answer in decimal form with 4 decimal places  (e.g. 3.22%
should be entered as 0.0322)

Correct!
0.0639

Correct Answers 0.0639 (with margin: 0)

Question 31 2
/ 2 pts

31-32.) Shown below are the yields of treasury securities at different maturities.

5-year 8%

10-year 12%

15-year 16%

20-year 18%

If a 20-year 12% corporate bond with remaining 12.25 years to maturity has a YTM of 18.7%, compute for the G-spread. Indicate your final answer in basis
points with 2 decimal places.

Correct!
670

Correct Answers 670 (with margin: 0)

Question 32 2
/ 2 pts

31-32.) Shown below are the yields of treasury securities at different maturities.

5-year 8%

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10-year 12%

15-year 16%

20-year 18%

If a 20-year 12% corporate bond with remaining 12.25 years to maturity has a YTM of 18.7%, compute for the I-spread. Indicate your final answer in basis
points with 2 decimal places

Correct!
490

Correct Answers 490 (with margin: 0)

Question 33 2
/ 2 pts

What would be the monthly amortization payment of a 15-year P10,000,000 mortgage with 7.60% interest and 7 points?

Correct!
93,270.41

Correct Answers 93,270.41 (with margin: 0)

Question 34 2
/ 2 pts

34-35.) Using your excess cash, you invested in Freeman Corp. 45-day commercial paper for a price of P2,940. You held it until maturity wherein you
received the par value of P3,000. No interest was received during the investment period.

Compute your holding period yield. Indicate your final answer in decimal form with 4 decimal places  (e.g. 3.22% should be entered as 0.0322)

Correct!
0.0204

Correct Answers 0.0204 (with margin: 0)

Question 35 2
/ 2 pts

34-35.) Using your excess cash, you invested in Freeman Corp. 45-day commercial paper for a price of P2,940. You held it until maturity wherein you
received the par value of P3,000. No interest was received during the investment period.

What is your effective annual yield? Indicate your final answer in decimal form with 4 decimal places  (e.g. 3.22% should be entered as 0.0322)

Correct!
0.1781

Correct Answers 0.1781 (with margin: 0)

Quiz Score:
50 out of 50
This quiz score has been manually adjusted by +4.0 points.

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