MINDANAO MISSION ACADEMY BUSINESS FINANCE

Accountancy, Business and Management GOLD

Semi-Final Examination
September 6-7, 2018

Name: _________________________________________ Score: ______________

Test I: Matching type: Match the description in box A with the answers in box B. Write the letters only. (10 pts)

A
J 1. Individuals maximize returns for a given level of risk or minimize risk if the returns are the same.
F 2. Money which is committed with an intention to earn a return over a period of time.
E 3. A deposit instrument which provides a low fixed rate of return but provides the convenience of availability.
H 4. A deposit instrument which usually requires a minimum amount of deposit with a fixed term of maturity
G 5. A risk which is associated with political and economic uncertainty of a particular business environment.
K 6. A risk which is related to the nature of the company’s products and its operating strategy.
L 7. The uncertainty of returns
D 8. A risk which exists if the investment is denominated in another currency different from the local currency.
A 9. Earning interest on interest
C 10. A system which was developed in assessing the overall condition of the bank

B
A. Compound Interest F. Investment K. Business Risk
B. Time value of Money G. Country risk L. Risk
C. CAMELS rating H. Time deposit account M. Financial Risk
D. Exchange rate risk I. Liquidity Risk N. Simple Interest
E. Savings Account J. Risk Aversion

Test II: Modified True or False: Encircle the letter of the correct answer. (5 pts)

1. Statement I: Treasury bond is a debt security issued by the national government which matures one year or less.
Statement II: Treasury bill is a debt security issued by the national government which matures longer than one year.
Statement III: There are other government securities issued by the government agencies aside from the bureau of
treasury such as bond issued by local government units.
a. All statements are true c. only statement III is true
b. only statement I is false d. All statements are false

2. Statement I: Stocks are financial Instruments that represent ownership in a corporation.

Statement II: Investors earn from equity investment through dividends and capital gains
Statement III: Companies are required to declare annual dividends to its shareholders.
a. All statements are true c. only statement I is true
b. only statement III is false d. All statements are false

3. Statement I: Common shares do not have a term to maturity. The shareholders may hold the stock indefinitely
Statement II: Corporations are not required to pay dividends annually to preferred stockholders.
Statement III: Dividends issued by corporations may vary from year to year since earnings of the company fluctuate
from period to period.
a. All statements are true c. only statement II is true
b. only statement III is false d. All statements are false

“Honesty is a very expensive gift. Do not expect it from cheap people” -Nora Azianty
4. Statement I: Banks are monitored by a governing body called the Bangko Sentral ng Pilipinas
Statement II: A bank may be graded by BSP with a rating as 1 as the lowest and 5 as the highest.
Statement III: A depositor of a bank is insured by PDIC up to 500,000.00 of its deposits.
a. All statements are False c. only statement III is true
b. only statement II is false d. Statement I and II are true
5. Statement I: Lending money to others and purchasing fixed income instruments such as government-issued treasury
securities and corporate bonds are also considered as financial investments.
Statement II: Time value of money must be considered in making the appropriate investment and financing decision.
Statement III: To get the future value, we multiply the present value by (1+r) t .
a. All statements are true c. only statement III is true
b. only statement II is false d. All statements are false

Test III. Fill in the blanks: Complete each sentence by filling-in the blanks. (15 pts)

1. “Compound Interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t , pays it.”

2. “Individuals won’t take on additional risk unless compensated by additional return.”

3. “A peso today is worth more than a peso tomorrow.”

4. “the greatest invention of mankind is compound interest.”

Test IV: Problem Solving. Show your complete solution (Answers should be rounded off to the nearest hundredths. Ex:
20.42842 = 20.43)

1. Your best friend placed her savings on account that provides an interest of 2% for 10 months. She expects to 30,000
after 10 months. Compute the present value. 24,610.45

2. Jasper borrowed from the bank P3,000 to buy new shoes. The bank charged 12% for the borrowed amount payable
after 3 years. Compute the future value. 4,214.78

3. Your school’s annual tuition fee is 60,000.00 per year if you pay at the start of the school year. Another option is to
pay for the tuition fee at the end but at a higher amount of 88, 500. The prevailing interest rate is equal to 12%.
Which option is better? Defend your answer
ANSWER:

PV=79,017.86 vs. 60,000

FV= 67,200 vs. 88,500

Option: you should pay at the start of the year because the PV of 88, 500 is still higher than 60,000 or, the future
value of 60,000 is still lower than 88, 500.

4. Your father told you that he will entrust you with the funds for your graduation program education. He gave you two
options whether to receive the money now in the amount of P150, 000 or to receive 420,000 ten years from now.
The available investment opportunities to you provide a 10% rate of return. Which option would you prefer? Defend
your answer. PV = 161, 928.2 vs. 150,000
FV = 389,061.37 vs. 420,000

Option: You will receive 420,000 in the future. Because it is still higher than the 150,000’s future value and the
present value is higher than 150,000.
“Honesty is a very expensive gift. Do not expect it from cheap people” -Nora Azianty
5. You and your entrepreneurship group, is planning to setup a store booth for CESA days. You are evaluating whether
you will sell buko juice or fish crackers. Buko juice requires an initial investment of P2, 000, while the fish crackers
require P1,500. The appropriate discount rate for these projects is 10%. The projects have the following cash
inflows:

Year Buko Juice Fish crackers

1 1, 000 890

2 1, 100 1, 500

3 955 900

Which of the product will you pursue? Defend your answer.

Buko Juice = 535.69

Fish Crackers = 971.83 – I will pursue this product because its net present value is higher compare to buko
juice.

“Honesty is a very expensive gift. Do not expect it from cheap people” -Nora Azianty