Pooled Investments 1
Pooled funds such as Mutual Funds and Unit Investment Trust Funds are typically measured using Net Asset Value (NAV), which helps investors determine the value per share or unit of the fund. Which formula correctly computes NAV?
A. Total Assets ÷ Total Liabilities
B. (Total Assets + Total Liabilities) ÷ Outstanding Shares or Units
C. (Total Assets – Total Liabilities) ÷ Outstanding Shares or Units
D. Total Assets ÷ Market Capitalization
C. (Total Assets – Total Liabilities) ÷ Outstanding Shares or Units
Several Philippine banks and trust companies offer UITFs as an accessible investment vehicle for retail investors. What does UITF stand for?
A. Unit Income Treasury Fund
B. Unified Investment Trading Facility
C. Unit Investment Trust Fund
D. Universal Investment Trading Fund
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C. Unit Investment Trust Fund
Which of the following does NOT fall under the category of derivatives?
A. Corn futures
B. S&P 500 call option
C. Gold fund-of-funds
D. Interest rate swap
C. Gold fund-of-funds
(Only the Gold fund-of-funds is not a derivative. It is a pooled investment product that invests in multiple gold-related funds. Its value does not come from a contract whose payoff depends on an underlying asset, which is why it is not considered a derivative.)
Private equity, real estate, and commodities are all considered "alternative investments" because they represent an alternative to investing exclusively in "traditional" asset classes, such as stocks and bonds. Investors usually add alternative investments to their portfolios to enhance returns and to:
A. avoid systematic risk.
B. ensure regular liquidity.
C. reduce transaction costs.
D. obtain diversification benefits.
D. obtain diversification benefits.
Which of the following statements is TRUE about Pag-IBIG MP2 Savings Program?
A. It has a 5-year maturity period.
B. The minimum investment is ₱500.00.
C. Contributions can be made anytime.
D. Only Statements A and B
E. Only Statements A and C
F. Only Statements B and C
G. All three Statements A, B, and C
H. None of the above
G. All three Statements A, B, and C
Which statement is generally TRUE about index funds?
A. Index funds typically attempt to beat or outperform the market index.
B. Index funds follow a passive strategy designed to replicate a benchmark.
C. Index funds typically charge higher fees due to marketing and distribution costs.
D. Index funds have higher tracking error due to regular portfolio rebalancing.
B. Index funds follow a passive strategy designed to replicate a benchmark.
Balanced Funds aim to achieve moderate growth by maintaining a diversified portfolio across different asset classes. In the Philippines, Balanced Mutual Funds and Balanced UITFs typically invest in a mix of:
A. Stocks and Money Market Investments
B. Stocks and Bonds
C. Bonds and Real Estate
D. Bonds and Cryptocurrency
B. Stocks and Bonds
Which of the following best describes the difference between forwards and futures?
A. Futures are standardized and exchange-traded, while forwards are customized and traded over-the-counter.
B. Futures are negotiated privately between parties, while forwards are traded in regulated exchanges.
C. Forwards are standardized in size, while futures vary according to buyer preference.
D. All of the above
E. None of the above
A. Futures are standardized and exchange-traded, while forwards are customized and traded over-the-counter.
Commodities such as gold, silver, and other precious metals, energy products, and agricultural products attract investors because they can provide inflation protection in a portfolio. Investors typically gain exposure to commodities by buying:
A. the physical commodity.
B. commodity derivatives.
C. Both A and B
D. None of the above
C. Both A and B
PERA, a retirement savings account, helps Filipinos prepare for retirement through regulated investment options and tax benefits. What does the acronym PERA mean?
A. Personal Equity and Retirement Account
B. Philippine Economy Retirement Aid
C. Partner for Enhanced Retirement Allocation
D. Philippine Employment Retirement Account
E. Pahingi Ekong Regalo Ateh
A. Personal Equity and Retirement Account
In the Philippines, all mutual funds operate as open-end funds, while in the U.S., mutual funds may be either open-end or closed-end. Compared with shares of closed-end funds, shares of open-end mutual funds:
A. trade throughout the day on an exchange like stocks.
B. have a fixed number of shares outstanding.
C. may trade above or below Net Asset Value (NAV) due to supply and demand.
D. are bought and sold at Net Asset Value (NAV) based on end-of-day pricing.
D. are bought and sold at Net Asset Value (NAV) based on end-of-day pricing.
(Open-end funds issue new shares when investors buy and redeem them directly from the fund at the end-of-day Net Asset Value or NAV. Closed-end funds issue a fixed number of shares through an IPO that then trade on a stock exchange.)
Which statement best describes the key difference between Mutual Funds (MF) and Unit Investment Trust Funds (UITF) in the Philippines?
A. UITFs are traded on the PSE, while MFs are not.
B. UITFs are protected by the Philippine Deposit Insurance Corporation (PDIC), while MFs are not.
C. MFs are priced at Net Asset Value per Unit (NAVPU), while UITFs are priced at Net Asset Value per Share (NAVPS).
D. MF investors become shareholders of the mutual fund company, while UITF investors do not become shareholders.
E. None of the above
D. Mutual Fund investors become shareholders of the mutual fund company, while UITF investors do not.
This refers to the asset, event, or outccome whose price, value, or occurrence determines the value of a derivative. It can be a real asset (such as wheat or gold) or a financial asset (such as shares of stocks). It can also be a broad market index, such as the S&P 500 index, or even an outcome, such as a day with temperatures under or over a specified temperature. This reference item which serves as the basis for a derivative's value is called:
Underlying / Underlying asset
Which of the following alternative investments is the least liquid?
A. An investment in a private equity fund
B. An investment in a real estate investment trust
C. An investment in a commodity ETF
D. An investment in a commodity futures contract
A. An investment in a private equity fund
(Investments in private equity funds are private market investments with no ready buyers, thus, they are illiquid investments. Real estate investment trusts, commodity ETFs, and commodity futures contracts are all traded on public exchanges, thus, they are more liquid investments.)
Cryptocurrencies are digital assets secured by blockchain technology, a decentralized system that records transactions across many computers.
Currently, the top two cryptocurrencies in terms of market capitalization are: __________________
Bitcoin (BTC) and Ethereum (ETH)
This type of pooled investment vehicle, typically offered only to a limited number of investors, pursues aggressive and flexible strategies such as investing in alternative assets, trading derivatives, engaging in arbitrage, and taking short positions. It commonly charges performance-based fees, where the manager earns incentive compensation only after surpassing a specified hurdle rate. What type of fund is being described?
Hedge Fund
In the Philippines, a Feeder Fund gives investors exposure to a target fund, usually foreign, aiming to closely mirror its performance. Philippine regulations require Feeder Funds to invest the majority of their assets directly into the target fund. What is the minimum percentage a Feeder Fund must invest in a single target fund?
____%
90%
(In the Philippines, a Feeder Fund is required to invest at least 90% of its assets in a single collective investment scheme, which is known as the "target fund". This rule is mandated by the Bangko Sentral ng Pilipinas (BSP) for Unit Investment Trust Funds (UITFs) and by the Securities and Exchange Commission (SEC) for mutual funds.)
When buying an option, the investor pays a certain amount upfront to the seller in exchange for the right, but not the obligation, to exercise the contract. This cost compensates the seller for taking on the risk. What is this payment called in an option contract?
Premium / Option Premium
Some private equity firms specialize in buying debt or equity of companies that are experiencing severe financial trouble, such as bankruptcy risk or heavy debt burdens. The goal is to turn these businesses around or to profit when their financial condition improves. What do you call this type of private equity strategy?
Distressed / Distressed Investing / Distressed Strategy
Cryptocurrencies often suffer from extreme price volatility, making them unreliable for everyday transactions and short-term savings. Which type of cryptocurrency addresses this issue by maintaining a constant value relative to a traditional currency such as the US Dollar?
Stablecoin
(A stablecoin is a type of cryptocurrency designed to maintain a stable value, usually by being pegged to an asset such as a fiat currency like the U.S. dollar. Examples of stablecoins include Tether (USDT) and USD Coin (USDC).)
A mutual fund in the Philippines with 30 million shares outstanding currently holds ₱300 million worth of stocks, ₱140 million bonds, ₱5 million T-bills, and ₱15 million cash. The fund’s total liabilities amount to ₱25 million. Compute the mutual fund’s Net Asset Value per Share (NAVPS).
₱14.50
Step 1. Compute Total Assets.
₱300M + ₱140M + ₱5M + ₱15M = ₱460M
Step 2. Subtract from Total Assets the Total Liabilities to determine the Net Asset Value (NAV).
NAV = ₱460M − ₱25M = ₱435M
Step 3. Divide NAV by the number of shares outstanding to determine the NAVPS.
NAVPS = ₱435M ÷ 30M shares = ₱14.50
NAVPU represents the Net Asset Value per Unit, or the price at which UITF units are bought or sold. A U.S. Tech Feeder Fund UITF shows these month-end NAVPUs:
January = 3.60 ; February = 3.66 ; March = 3.92 ; April = 3.70 ; May = 4.00
If an investor invested ₱5,000 by buying the UITF at end-January and redeemed the units at end-March, what is the investor's 2-month return? (Round your answer to one decimal place and express as a percentage.)
8.9%
Return or ROI %
= (NAVPU at Redemption − NAVPU at Purchase) / NAVPU at Purchase
= (3.92 − 3.60) / 3.60 = 8.9%
You purchased a call option on a stock and paid a premium of $3 per share. The call option gives you the right, but not the obligation, to buy the stock at a strike price of $26 on the expiration date. At expiration, the stock is trading at $39 per share. What is your net profit per share as the call option buyer?
$10
Step 1. Compute the intrinsic value of the option at expiration.
Intrinsic Value = Stock Price at expiration − Strike Price
Intrinsic Value = $39 − 26 = $13
Step 2. Subtract the option premium paid from the intrinsic value.
Net Profit = $13 − 3 = $10
A hedge fund has allocated its Alternative Investments portfolio across three asset classes: 30% in Real Estate, 20% in Commodities Trading, and the rest in Private Equity. This year, its Real Estate investments generated a 10% return, Commodities Trading netted 1.5%, while Private Equity holdings lost 20%.
What is the net return of the hedge fund's Alternative Investments portfolio? (Round your answer to one decimal place and express as a percentage.)
-6.7%
Portfolio Return = sum of weighted returns of all investments
(i) Real Estate: 30% × 10% = 0.3 × 0.10 = 3%
(ii) Commodities: 20% × 1.5% = 0.2 × 0.015 = 0.3%
(iii) Private Equity: 50% × (-20%) = 0.5 × (-0.20) = -10%
Portfolio Return = 3% + 0.3% - 10% = -6.7%
An investor placed ₱100,000 in a time deposit with a Philippine bank paying 2.5% interest p.a. If the investor kept the time deposit for 6 months, and time deposit earnings are subject to a 20% final withholding tax, how much net interest income (in ₱ amount) did the investor receive?
₱1,000
Gross Interest Income = ₱100,000 × 2.5% × 6/12 = ₱1,250
Net Interest Income (after withholding tax) = ₱1,250 ×(1−0.20) = ₱1,250 × 0.80 = ₱1,000