POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

College of Accountancy and Finance Student Council

CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

I. TRUE OR FALSE

1. Markets need not be a physical location, what is important thing is that buyers and
sellers can communicate.
2. Security is a fungible, negotiable financial instrument that holds some type of monetary
value.
3. Once issues have been distributed to the public, members of the public may trade the
securities among themselves, trading occurs in the primary market.
4. The top-down approach assumes that both economy/market and the industry have a
substantial impact on individual stocks.
5. In a liquidation, common stocks have a greater claim to a company’s assets and
earnings.
6. Stocks are among the best types of assets to invest in.
7. Being a stockholder of a corporation earns one right to vote in the election of the Board
of Directors in its annual stockholders’ meeting.
8. Securities and Exchange Commission is tasked with serious responsibility of enforcing
all laws affecting corporations and other forms of associations not otherwise vested in
some other government offices.
9. An equity security represents money that is borrowed and must be repaid.
10. In any case, capital market is characterized by a high degree of safety and a relatively
low return in interest.
11. Market manipulation is when someone artificially affects the supply or demand for a
security.
12. Bottom-up Approach analyzes the individual companies to find undervalued stocks,
regardless of the economy/market and the industry.
13. Preferred stock functions similarly to bonds since investors are usually guaranteed a
fixed dividend in perpetuity.
14. You can start investing in the stock market even without a strategy.
15. Capital Market Integrity Corporation (CMIC) acts as the dependent audit, surveillance
and compliance arm of the exchange.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

I. MULTIPLE CHOICE

1. The following are core values of Securities and Exchange Commission (SEC),
EXCEPT:
A. Integrity
B. Transparency
C. Independence
D. Professionalism

2. Securities and Exchange Commission (SEC) was created on _________ by

Commonwealth Act (CA) 83 also known as The Securities Act.
A. October 26, 1983
B. October 16, 1936
C. October 6, 1938
D. October 26, 1936

3. Calculated as the percentage market share of N largest firms in an industry.

A. Concentration Ratio
B. Herfindal Index
C. EPS Maximization
D. Net Income

4. Refers to the public solicitation to all shareholders requesting that they tender their
stock for sale at a specific price during a certain time.
A. Payment Fraud
B. Embezzlement
C. Tender Offer
D. Securities Fraud

5. Is a decentralized market in which market participants trade stocks, commodities,

currencies, or other instruments directly between two parties and without a central
exchange or broker.
A. Exchange Traded
B. Over the Counter (OTC) market
C. Sari-Sari Store
D. Wet Market
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

6. An order with specified buy or sell price

A. Short Sales
B. Market Orders
C. Spend Orders
D. Limit Orders

7. Reason/s why people lose money in the stock market

A. Not doing any research
B. Trying to get rich quickly
C. Letting emotions drive investing decision
D. All of these

8. STATEMENT 1: When it comes to company’s dividends, the company’s board of

directors will decide whether or not to pay out a dividend to common stockholders.
STATEMENT 2: If a company misses a dividend, the common stockholder gets
bumped back for a preferred stockholder, meaning paying the latter is a high priority
for the company.

A. Both statements are true

B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true

9. They are the purchasers of financial securities for the purpose of providing capital to
the issuers, and making money for themselves.
A. Issuers
B. Investors
C. Brokers
D. Underwriters

10. They may buy securities from their customer who is selling or sell from their own
inventory to its customer who is buying
A. Issuers
B. Investors
C. Brokers
D. Underwriters
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

11. These well-known types of fraud involve a non-sustainable business model in which
the investments of later investors are used to pay earlier investors, giving the
appearance that the investments of the initial participants dramatically increase in value
in a short amount of time.
A. Ponzi Schemes Fraud
B. Corporate Fraud
C. Payment Fraud
D. Securities Fraud

12. Which of the following is/are type of issuance:

A. Equity
B. Debt
C. Hybrid
D. All of these

13. Which of the following is not a type of risk of investing in stocks:

A. Transaction Risk
B. Market Risk
C. Liquidity Risk
D. Volatility Risk

14. It refers to illegal activities undertaken by an individual or company that are done in a
dishonest or unethical manner.
A. Ponzi Schemes Fraud
B. Corporate Fraud
C. Payment Fraud
D. Securities Fraud

15. Trading style that involves investing a fixed amount on profitable companies at regular
intervals
A. Position Trading
B. Stock Investing Strategies
C. Peso Cost Averaging
D. Day Trading
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

16. This style of trading requires investors to utilize long-term time charts such as weekly
and monthly charts.
A. Position Trading
B. Stock Investing Strategies
C. Peso Cost Averaging
D. Day Trading

17. ___________ money supply causes interest rates to rise, ________ money supply
reduces cost of money and increase in demand.
A. Increased, Increased
B. Increased, Decreased
C. Decreased, Increased
D. Decreased, Decreased

18. ________ is a tool that facilitates an understanding of a company’s position relative to

other companies that produce similar products or services.
A. Business Analysis
B. Company Analysis
C. Industry analysis
D. Economic Analysis

19. __________ is a market in which shares are issued and traded, either through
exchanges or over-the-counter markets
A. Primary market
B. Secondary market
C. Equity market
D. Bond Market

20. STATEMENT 1: When people talk about stocks they are usually referring to a
common stock.
STATEMENT 2: The great majority of stocks is issued in the form of preferred stock.

A. Both statements are true

B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

21. One of the core values of Securities and Exchange Commission (SEC) in which it says,
“We are responsible for our actions and decisions.”
A. Teamwork
B. Accountability
C. Professionalism
D. Integrity

22. Is a state-of-the-art, fully automated system that facilitates the efficient processing,
validation, submission, distribution, and analysis of time-sensitive disclosure reports
submitted to the Exchange.
A. PSE Electronic Disclosure Generation Technology (PSE EDGE)
B. Securities Investor Protection Fund (SIPF)
C. Total Market Surveillance (TMS)
D. PSE Online Disclosure System (ODiSy)

23. This is the longest phase. Industry growth rates will approach the growth rate of the
aggregate economy. Competition produces tight profit margins and ROEs become
competitive (normal)
A. Mature growth phase
B. Stabilization and market maturity phase
C. Deceleration of growth and decline
D. Rapid accelerating growth phase

24. The ___________ is calculated as the sum of the squared market shares of the firms in
the industry. It is always less than one.
A. Concentration ratio
B. Interest rate
C. EPS Maximization
D. Herfindahl Index

25. Is financial asset that does not fall into one of the conventional investment categories.
A. Capital markets
B. Derivatives
C. Alternative Investments
D. Money market
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

26. STATEMENT 1: A trade can be executed between two participants in an OTC market
without others being aware of the price at which the transaction was completed.
STATEMENT 2: An exchange centralizes the communication of bid and offer prices
to all direct market participants, who can respond by selling or buying at one of the
quotes or by replying with a different quote.

A. Both statements are true

B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true

27. STATEMENT 1: Most PSE-listed companies distribute a portion of their earnings to

their shareholders by paying dividends in the form of cash or free additional shares of
stock.
STATEMENT 2: Stock market investors generally receive dividends only once a year.

A. Both statements are true

B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true

28. Which of the following is/are examples of white-collar crimes?

A. Homicide
B. Money Laundering
C. Murder
D. Both A and C

29. It refers that up to certain limit, you receive your money back if the broker goes into
bankruptcy or commits fraud.
A. Investor Protection
B. Restraining Order
C. Insider Trading
D. Securities Investor Protection Fund (SIPF)
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

30. Legally responsible for the obligations of the issue and reporting financial conditions,
material developments and any other operational activities as required by the
regulations of their jurisdictions.
A. Issuers
B. Investors
C. Underwriters
D. Regulatory Agencies

31. Which of the following is/are the importance of secondary market?

A. Provides liquidity
B. Lower costs
C. Helps determine the market for new issues
D. All of these

32. An order to sell or buy a stock at the best current price

A. Short sales
B. Spend orders
C. Market orders
D. Limit orders

33. This is the new issue market, dominated by investment bankers who are experts in new
issues.
A. Market Market
B. Primary Market
C. Black Market
D. Secondary Market

34. RA 10365 is also known as:

A. Lending Company Regulation Act
B. Investment Company Act
C. Financing Company Act
D. Anti-Money Laundering Act

35. Association of organizations that regulate the world’s securities and future markets.
A. ASEAN
B. CMIC
C. UNESCO
D. IOSCO
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

36. A PSE regulation which ensures that stockbrokers have enough capital to cover its
exposure to risks.
A. Risk Based Capital Adequacy
B. Self-Regulatory Organization Status
C. Disclosure Rules
D. Customer First Policy

37. Occurs when someone in charge of another’s money and/or property, usually a
company’s, takes or uses those assets for their own personal gain.
A. Securities Fraud
B. Embezzlement
C. Corporate Fraud
D. Payment Fraud

38. Is a tool that facilitates an understanding of a company’s position relative to other

companies that produce similar products or services.
A. Industry Analysis
B. SWOT Analysis
C. PESTEL Analysis
D. Porter’s Five Forces Analysis

39. Is an indirect method used by the government to manage the rate of economic growth.
A. Fiscal policies
B. Government spending
C. Monetary policies
D. Inflation

40. Business cycle stage in which the economy begins to show signs that the recession is
ending.
A. Early expansion
B. Late expansion
C. Recovery
D. None of these
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

41. Includes age distribution and population changes, income distribution, ethnic
compositions, and geographical distribution
A. Lifestyles
B. Demographics
C. Technology
D. Politics and Regulation

42. This makes stock market investing ideal for long-term financial goals such as
retirement.
A. Capital Growth/ Price Appreciation
B. Dividend Income
C. Right to be a Company’s Part Owner
D. None of these

43. Refers to the buying and selling of securities on the same day, often online, on the basis
of small, short-term price fluctuations.
A. Peso Cost Averaging
B. Investing in Blue Chip Stocks
C. Position Trading
D. Day Trading

44. Stocks that you cannot get out quickly

A. Trade risk
B. Market risk
C. Liquidity risk
D. Margin risk

45. When there is a ____ demand to invest in the company, the price of the stock tends
to____.
A. high, rise
B. low, fall
C. low, rise
D. high, fall
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

46. The main difference of preferred and common stock is/are:

A. Voting rights
B. Dividends
C. Liquidation
D. All of these

47. STATEMENT 1: Equity securities do not entitle the holder to some control of the
company on a pro rata basis, via voting rights.
STATEMENT 2: Holders of equity rights are typically entitle to regular payments.
A. Both statements are true.
B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.

48. Complex organizations with their own economic and institutional structures that play
a critical role in determining how prices are established or “discovered”.
A. Markets
B. Financial Markets
C. Black Market
D. Capital Market

49. Which of the following is/are type of Alternative Investments?

A. Funds
B. Stocks
C. Bonds
D. Cash

50. The legal nature of these products offered is very different, as well as the way they are
traded, though many market participants are active.
A. Black market
B. Derivatives
C. Supermarket
D. Money market
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

51. Any party that evaluates and assumes another party’s risk for a fee.
A. Issuers
B. Investors
C. Brokers
D. Underwriters

52. Which of the following is/are types of clearing agencies?

A. Clearing corporations
B. Depositories
C. Both A and B
D. None of these

53. Who may avail or register in SEC for Initial Public Offering?
A. Corporations that will conduct Initial Public Offering
B. Corporations that will apply for Listing on an Exchange
C. Companies issuing securities to raise more capital
D. All of these

54. The PSE requires that material information that which may affect a listed company’s
share price positively or negatively, are disclosed within 10 minutes after its
occurrence.
A. 10-Minute Rule
B. Selective Disclosure Rule
C. Customer First Policy
D. Self-Regulatory Organization Status

55. Equipped with the critical elements of the surveillance process and provides a robust
monitoring and warning mechanism.
A. PSE Electronic Disclosure Generation Technology (PSE EDGE)
B. Securities Investor Protection Fund (SIPF)
C. Total Market Surveillance (TMS)
D. PSE Online Disclosure System (ODiSy)

56. Which of the following is/are considered a payment fraud?

A. Generating false payments
B. Making fraudulent payments to oneself
C. Intercepting and altering payee details
D. All of these
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

57. Type of fraud occurs when an apparently legitimate business is set up with the intention
of defrauding its suppliers and customers. This may be after the business has developed
a good reputation and credit history
A. Long-term fraud
B. Short-term fraud
C. Both of these
D. None of these

58. Which of the following is/are the reasons to start stock market investing?
A. Capital Growth / Price Appreciation
B. Dividend Income
C. Right to be a Company’s Part Owner
D. All of these

59. STATEMENT 1: Common stock of good companies are not necessarily good
investments, vice versa.
STATEMENT 2: Investment decision is made upon comparison of valuation results
versus current stock price.

A. Both statements are true.

B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.

60. STATEMENT 1: Debt securities can be secured or unsecured.

STATEMENT 2: If unsecured, may be contractually prioritized over ther unsecured,
subordinated debt in the case of bankruptcy.

A. Both statements are true.

B. Both statements are false.
C. Only statement 1 is true.
D. Only statement 2 is true.

** Nothing Follows **
God Bless 
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
FIMA 40023: Security Analysis (Midterm Examinations)

ANSWER KEY
TRUE or FALSE
1. T 7. T 13. T
2. T 8. T 14. F
3. F 9. F 15. F
4. T 10. F
5. F 11. T
6. T 12. T

MULTIPLE CHOICE
1. B 21. B 41. B
2. D 22. A 42. A
3. A 23. B 43. D
4. C 24. D 44. C
5. B 25. C 45. A
6. D 26. A 46. A
7. D 27. C 47. B
8. A 28. B 48. B
9. B 29. A 49. A
10. C 30. A 50. B
11. A 31. D 51. D
12. D 32. C 52. C
13. A 33. B 53. D
14. B 34. D 54. A
15. C 35. D 55. C
16. A 36. A 56. D
17. C 37. B 57. A
18. C 38. A 58. D
19. C 39. C 59. A
20. C 40. C 60. A