Monetary Policy and Central Banking
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Questions and Answers

What is the term used for shares of ownership in a corporation?

Stocks

Which of the following is NOT typically considered a major factor influencing the global economy after a pandemic?

  • Technological advancements
  • Government policies
  • Consumer confidence
  • Weather patterns (correct)

    • The Philippine Stock Exchange offers opportunities primarily for institutional investors, not individual investors.

    False (B)

    To begin investing in the Philippine Stock Exchange, individuals typically need to open a ______ account with a licensed brokerage.

    <p>trading</p> Signup and view all the answers

    Match the following terms related to the Philippine stock market with their definitions:

    <p>Stockbroker = An individual or firm that facilitates the buying and selling of securities Securities and Exchange Commission (SEC) = The government agency that regulates the Philippine stock market Philippine Stock Exchange (PSE) = The primary market for trading publicly-listed stocks in the Philippines IPO = The first offering of shares to the public by a company that is going public</p> Signup and view all the answers

    What is a Certificate of Authority (CA) in the Philippine context?

    <p>A certificate issued by the SEC allowing a lending or financing company to operate legally.</p> Signup and view all the answers

    Which of the following is NOT typically a compliance requirement for lending and financing companies in the Philippines?

    <p>Paying a flat tax rate on all interest earned (D)</p> Signup and view all the answers

    The Securities and Exchange Commission (SEC) in the Philippines primarily focuses on protecting investors from fraud and misconduct in the securities markets.

    <p>True (A)</p> Signup and view all the answers

    Which type of credit requires full payment each month and does not allow carrying a balance?

    <p>Charge Card (D)</p> Signup and view all the answers

    Revolving credit allows you to borrow money up to a certain limit and can carry a balance from month to month.

    <p>True (A)</p> Signup and view all the answers

    What is a common example of installment credit?

    <p>Home mortgage or auto loan</p> Signup and view all the answers

    ___ credit requires collateral to guarantee loan repayment.

    <p>Secure</p> Signup and view all the answers

    Match the following types of credit with their characteristics:

    <p>Revolving Credit = Allows borrowing up to a limit with a balance that can be carried Charge Card = Must be paid in full each month with no carryover Installment Credit = Involves fixed payments over a set period Unsecured Credit = Has no collateral backing the loan</p> Signup and view all the answers

    What is collateral in the context of bank loans?

    <p>Assets pledged as security for loan repayment (C)</p> Signup and view all the answers

    Credit history reflects the future financial behavior of a client.

    <p>False (B)</p> Signup and view all the answers

    What refers to the macro-economic factors of a country that impact lending decisions?

    <p>Condition</p> Signup and view all the answers

    The process of granting credit includes setting the terms and ensuring compliance with the company's credit _____ policy.

    <p>credit</p> Signup and view all the answers

    Match the terms with their definitions:

    <p>Mortgage = A loan secured by real property Pledge = A promise to repay a loan with assets as security Credit score = A numerical expression of creditworthiness Dividend = A payment made to shareholders from company earnings</p> Signup and view all the answers

    Which of the following describes the consequences of continued non-payment of credit?

    <p>Service cancellation may occur and credit scores can be affected (B)</p> Signup and view all the answers

    Normal lending refers to loans and advances that are directed towards specific purposes.

    <p>False (B)</p> Signup and view all the answers

    What is advantageous against accumulating credit card debt?

    <p>Personal loan</p> Signup and view all the answers

    Credit history provides lenders with a picture of your payment _____ and risk factor.

    <p>history</p> Signup and view all the answers

    Match the forms of equity with their descriptions:

    <p>Common stock = Ownership share in a corporation with voting rights Preferred stock = Equity with fixed dividends and priority over common stock Convertible bond = A bond that can be converted into shares of stock Warrant = A security that gives the holder the right to purchase stock at a specific price</p> Signup and view all the answers

    What is one primary reason investors purchase traded securities?

    <p>To share in profits or increase in value (B)</p> Signup and view all the answers

    All forms of money serve as a medium of exchange.

    <p>True (A)</p> Signup and view all the answers

    What are the three basic functions of money mentioned?

    <p>Store of value, unit of account, medium of exchange</p> Signup and view all the answers

    Money is anything generally accepted in exchange for goods and ______.

    <p>services</p> Signup and view all the answers

    Match the following forms of money with their historical examples:

    <p>Cowry shells = Ancient currency Furs = Animal skins used as trade Beads = Ornamental items used as money Stone wheels = Large objects used in trade</p> Signup and view all the answers

    Which of the following is NOT a form of money?

    <p>Stocks (D)</p> Signup and view all the answers

    Money holds its value over time, affected only by inflation.

    <p>True (A)</p> Signup and view all the answers

    Why is price stability important according to the content?

    <p>It allows money to work with minimal friction.</p> Signup and view all the answers

    The function of money as a standard measure of value is known as a ______ of account.

    <p>unit</p> Signup and view all the answers

    Which of the following is an example of a financial security that can help stabilize a business?

    <p>Futures contracts (C)</p> Signup and view all the answers

    What type of security grants its holder the right to subscribe to new shares at a set price within a specific time frame?

    <p>Warrants (C)</p> Signup and view all the answers

    Holders of common stocks have voting rights and are the first to receive dividends.

    <p>False (B)</p> Signup and view all the answers

    What are the two main types of securities traded in the capital market?

    <p>Stocks and bonds</p> Signup and view all the answers

    In a situation of extreme inflation, known as ______, people may switch to a more stable currency.

    <p>hyperinflation</p> Signup and view all the answers

    Which of the following is NOT a type of security?

    <p>Commodities (B)</p> Signup and view all the answers

    Match the following securities with their primary characteristic:

    <p>Common Stocks = Entitled to dividends before common stockholders Preferred Stocks = Right to subscribe to new shares at a set price Warrants = Holders have voting rights Philippine Deposit Receipts = Represents ownership of a foreign corporation Small-Denominated Treasury Bonds = Long-term, risk-free debt securities issued by the Philippine government</p> Signup and view all the answers

    What type of security is considered relatively risk-free and issued by the Bureau of Treasury (BTr) in the Philippines?

    <p>Small-Denominated Treasury Bonds (SDT-Bonds)</p> Signup and view all the answers

    Securities are traded only in the stock market.

    <p>False (B)</p> Signup and view all the answers

    Holders of ______ stocks are entitled to receive dividends before holders of common stocks.

    <p>preferred</p> Signup and view all the answers

    Which of the following statements is TRUE about the Philippine Deposit Receipts (PDRs)?

    <p>They are evidences of ownership of a foreign corporation. (B)</p> Signup and view all the answers

    Study Notes

    Handouts 2: Monetary Policy and Central Banking

    • All traded securities, from futures to currency swaps, are ownership investments. Investors buy them to share profits or because of increased value.
    • Some investments, like stocks, give a portion of the company's value to the investor. Others, like futures contracts, allow specific actions that benefit owners.
    • Money is anything generally accepted for goods and services. It serves as a store of value, a unit of account, and a medium of exchange.
    • Money's value can be impacted by inflation. High inflation makes money less useful as a store of value and a medium of exchange.
    • Barter is the exchange of goods and services directly without money. This process can be inefficient due to the need for "double coincidence of wants."
    • Money efficiently solves the "double coincidence of wants" problem. It cuts down on search costs and allows workers to specialize in their areas of expertise.
    • Investments involve committing money for a period to generate future payments that compensate the investor. This includes considering factors such as the time the funds are committed, expected rate of inflation and the uncertainty of future payments in this investment decision.
    • Investors manage risk when making a tradeoff between expected returns and risk factors.
    • The "investment decision process" includes security analysis and valuation, and portfolio management.
    • There are different sources of risk, such as interest rate risk, purchasing power risk, bull-bear market, default, liquidity, and political risk.

    Stocks and Bonds

    • Stocks represent ownership shares in a corporation.
    • Securities are proof of ownership or indebtedness in a company. Examples include Treasury bills, commercial papers, and stocks and bonds.
    • Common stocks allow participation in profits and control of the company, with voting rights and last claim in case of liquidation.
    • Preferred stocks have precedence over common stocks in dividend distribution, but have a limited rate of return.
    • Warrants allow the holder to buy additional shares at a specified price.
    • Philippine Deposit Receipts (PDRs) give rights to underlying shares or certain other benefits.
    • Small-Denominated Treasury Bonds (SDT-Bonds) are long-term, risk-free debt securities issued by the Philippine government.
    • Securities are bought and sold through stock exchanges like the Philippine Stock Exchange (PSE).
    • Stockbrokers facilitate share and bond transactions.
    • There are minimum investment amounts required for the stock market, which vary according to the market prices and the price range, specified by the board lot.

    Lesson 1: Money and Inflation

    • Economists compare money to inventions like the wheel and inclined plane, emphasizing its utility.
    • Money facilitates transactions in amazing ways.
    • Understanding how money, investment, and different forms of credit work.
    • Understanding the difference between a charge card and a credit card. Charge cards require payment in full each month, whereas credit cards can carry a balance.
    • Installment credit involves a set amount borrowed, set monthly payments, and a timeframe for repayment.
    • Common forms of installment credit include mortgages and auto loans, which often require collateral.
    • Non-installment credit allows borrowers to pay for services at a later date.
    • Credit management involves granting credit, setting terms, and recovering credit, ensuring the compliance with credit policies.
    • The spread between lending rates and deposit rates is vital to a bank's profitability.

    Credit System

    • Credit is the amount of money a borrower can access from a lending institution, with repayment terms and fees.
    • Credit includes a borrowing reputation, showing a history of repayment capability which is also known as a risk factor
    • Credit is used as a convenient financial tool for transactions, from credit cards to loans.
    • Understanding credit is crucial for utilizing it effectively and avoiding debt.
    • Four common forms of credit include revolving, installment, and service credit. Different forms of credit have different repayment structures.
    • There are specific requirements for granting credit to a customer, including the customer's integrity, capacity to repay or manage debt, and capital.

    Post-Test

    • Research 10+ Philippine lending and financing companies, including their CA updates and pertinent laws and IRRs for protection
    • Identify relevant legal procedures and regulations concerning SEC registration
    • Gather information on SEC reporting, compliance requirements and grievance procedures.

    Additional Information

    • Specific examples of securities, different types of lending, and the factors affecting investment decisions are described in detail.

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    Related Documents

    Handouts 2: Monetary Policy and Central Banking PDF

    Description

    This quiz explores key concepts related to monetary policy and central banking, including the nature of money, investment types, and the implications of inflation. Understand how money serves as a medium of exchange, a unit of account, and affects economic efficiency. Test your knowledge on the importance of money compared to barter systems.

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