True or False
Europe’s stock markets are the world’s largest.
FALSE
Where do corporations have to register if they wish to issue their shares in the stock market?
Securities and Exchange Commission
What is the biggest company in terms of market capitalization listed in the Philippine Stock Exchange?
SM / SM Investment Corporation (with 1,023,895,950)
XYZ Corp. has 20 million shares of common stock outstanding and 4 candidates are up for election for 2 seats on the board of directors. Using cumulative voting to elect its board, what is the minimum number of votes needed to ensure election to the board?
10 million votes
Total number of votes = 20 million * 2 seats = 40 million
Minimum number of votes = 40 million / 4 = 10 million votes
The Philippine Stock Exchange has a semi-strong form of market efficiency.
TRUE
This allows existing shareholders to buy shares that are newly offered to maintain their proportional ownership in the corporation.
Preemptive Right
Where is the trading floor of the PSE currently located?
Bonifacio Global City
Suppose a company gives $5 in dividends to its shareholders and the closing price is $48 on Oct. 18, 2018. Calculate the dividend yield on the company’s stock as of Oct. 18, 2018?
10.4167%
$5 / $48 = 10.4167%
An efficient market is a market in which all the available information is fully incorporated into the prices of the securities and the returns the investors earn on their investments can be predicted.
FALSE
The returns the investors earn on their investments CANNOT be predicted.
In a firm commitment underwriting, the difference between the gross and net proceeds is called _______________.
Underwriter's spread
How many companies constitute the PSEi or the Philippine Stock Exchange Composite Index which is used as the benchmark in measuring the performance of the Philippine Stock Market?
A. 20
B. 30
C. 265
D. 300
B. 30
Suppose you bought ABC’s stock on Jan. 1 for a price of $40 and paid dividends in the current year in the amount of $5. The stock decreased in price by 2.5%. Calculate the return on the stock for the year.
10%
Return = [(39-40)/40] + (5/40) = 10%
Technical Analysis considers stock price and volume as its only inputs.
TRUE
The preliminary version of the prospectus describing a new security issue distributed to potential buyers prior to the security’s registration.
Red Herring Prospectus
The most recent company to have its IPO in the Philippine Stock Exchange.
D.M. Wenceslao & Associates (DMW)
You bought a stock in DEF corp. The stock had a return of 10% for the year, a dividend yield of 7.77% and had an ending price of $45. Calculate the purchase price.
$44.09
Dividends = $45 * 7.77% = 3.5
10% = [(45 - X) / X] + (3.5 / X) = $44.09
If strong form market efficiency does not hold, then semi-strong form market efficiency does not hold as well.
FALSE
When an investor borrows the stock and sell it to another investor at a higher price, this transaction is referred to as __________.
Short sell transaction
Year to Date the stock price of this particular company reached a gain of more than 1000%
CLUE: This stock helped its owner to become the second richest person in the Philippines due to change in its stock price
Golden Bria Holdings, Inc. (HVN)
In 2015, JKL’s stock had a return of 5% and paid dividends of $1.2 per stock. You then decided to buy JKL’s stock on January of 2016 for a purchase price of $32 and you expect that JKL will pay dividends of $2.2 per stock at year end. After holding the stock for a year, the stock paid actual dividends of $1.5 per stock and had a dividend yield of 7.5%. Calculate the return of the stock in 2016.
-32.8%
1.5 / 7.5% = 20 (ending price)
Return = [(20 - 32) / 32] + (1.5 / 32) = -32.8%
FINAL JEOPARDY: 500 X 2!!!
The Philippine Stock Exchange is a product of the merger of ___________ and ____________.
Manila Stock Exchange
Makati Stock Exchange