Business Finance

Performance Task No. 1

A. Mutual Fund vs. Trust Fund

Similarities

1. Unit investment trusts (UITs) and mutual funds are both baskets of stocks, bonds, and other
securities that pool investors' finances.
2. Both types of funds can vary in risk level, which is based on their holdings.
3. Both UTIs and mutual funds are designed to hold a diverse array of assets. On a high level, they
don't set limits on types of holdings, and both may consist of stocks, bonds, or other
investments. Though certain funds may have their own rules.
4. Both UITs and mutual funds are required to distribute capital gains and dividends to their
shareholders.
5. Both UITs and mutual funds are regulated by the U.S. Securities and Exchange Commission
(SEC).

Differences

1. Mutual Fund
- A mutual fund allows for investment in several company stocks without actually owning the
stocks.
- Mutual funds are open-ended and actively managed.
- New shares can be offered and shares can be closed.
- No termination dates.
- Shares can be rotated (exchanged) between different funds, but not between investors.
2. Trust Fund
- A trust fund is a legal entity that addresses the distribution of assets.
- No active management.
- UITs are trust funds with a set number of shares and end dates. They are often set up in
series.
- Have a termination date.
- Fund sponsors can assist in the buying and selling of shares between fund investors and can
allow unit exchanges.
 B. Currencies vs. Cryptocurrencies

Similarities

1. They both reduce the need for physical cash and streamline paying for goods and services.
2. They also use the basic concept of blockchain technology, like storing transaction data in blocks
and using nodes to verify transactions.

Differences

1. Currencies
- The conversion and the value will be the same as with physical money and volatility will be
avoided.
- They will be accepted and available for all types of online and offline transactions 24/7.
- Attached to a person’s existing bank account, which will contain their personal information.
- There’s a central authority that controls, so scaling the network is much easier.
- Use a private permissioned blockchain network.
2. Cryptocurrencies
- Users that use cryptocurrency have anonymity when they make transactions on the
network.
- Nodes have to reach a mutual consensus to change any aspects of the network. This could
present a challenge when the network needs to scale, but the nodes are not in agreement
on the way forward.
- Use a permissionless open network.

Questions: (answers)

(1)

Among the types of investment, I find Unit Investment Trust Funds (UITF) the most favorable.
According to my research, in recent years, the Philippine per capita gross domestic product has been
growing, largely as a result of fiscal developments and the inflow of funds from Overseas Filipinos. As
our country becomes economically developed and its populace subsequently wealthier and more
sophisticated, it will follow the trend worldwide wherein in an improving economy, there is a noticeable
interest in the money and capital markets where investors are able to share in the growth of the
economy and participate in the profits of the more established companies. While investing in the capital
markets has traditionally been only for people with large portfolios and the expertise to manage risks
and pursue higher returns, pooled funds like the Unit Investment Trust Fund (UITFs) have enabled a
wider number of people to participate in these markets.

UITFs offer investors an opportunity to potentially earn higher returns. By its nature, UITFs pool the
funds of investors to create a large fund that, under the watchful eyes of professional fund managers,
can productively harness these funds, taking advantage of economies of scale. UITFs are thereby able to
provide even smaller investors access to the financial markets for investments that normally are just
available to big investors. In addition to this, there are UITFs for the conservative, the moderate, and the
aggressive investor, and each UITF is governed by a Declaration of Trust (DOT) which defines its
investment objectives and the investments allowed for that particular UITF to meet such objectives.

(2)

Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions
updated and held by currency holders. Units of cryptocurrency are created through a process called
mining, which involves using computer power to solve complicated mathematical problems that
generate coins. Users can also buy the currencies from brokers, then store and spend them using
cryptographic wallets.

Performance Task No. 2

Questions: (answers)

1. The stock has declined in value, so if Zycy sells the shares today, she will face the risk of capital
loss. Risk of capital or capital risk is the possibility that an entity will lose money from an
investment of capital. Capital risk can manifest as a market risk where the prices of assets move
unfavorably, or when a business invests in a project that turns out to be a dud.
2. Investment needs of an individual are driven by various goals and objectives varying from self/
child education, children’s marriage, retirement needs, creating a fund for a down payment for
buying a house, travel funds, emergency fund, etc. Basis the needs and the goals of investment,
individuals assess their risk tolerance appetite. In Zycy’s case, we found out that there is a risk of
capital loss from her shares. Capital risk is the possibility that an entity will lose money from an
investment of capital. And therefore, in order to ease the loss of capital and avoid liquidity risk,
it is ideal to stay invested in a bellwether stock or fund. Zycy should watch out for the credit
rating of debt securities and could invest in better rated securities to avoid default risk.