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FINMAR 2A Worksheet4
FINMAR 2A Worksheet4
Worksheet 4:
2. A derivative may be
a. An asset account
b. A liability account
c. An owner equity account
d. Either an asset or liability account
3. On August 1, 2020, Blossom Co purchased 5,000 pound of Italian pasta for 50,000
Euros payable in 60 days. On August 1, One Euro is worth P70.60. The 60 day
forward rate on August 1 for one euro is P71.10. Blossom Company should record
the cost of the pasta as
a. P3,538,500
b. P3,530,000
c. P25,000
d. P3,555,000
5. Forwards are
a. Absolutely the same as futures
b. Over the counter derivatives
c. Exchange traded derivatives
d. Standardized like futures
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W4-2 Match the following terms with the correct definition (10 Points)
W4-3 Compare and contrast Eurobond market and Foreign bond market (10 Points)
A Eurobond market is a long-term bond that is issued and sold outside the country where
it has been denominated. Any country can make a Eurobond, even if the implication of its name
indicates that Europe is involved (Gaille, 2018). An example of this is a bond that is written in
U.S. dollars but issued in a foreign country, even if the bond was not issued in Europe. In
addition, governments can issue Eurobonds for financing if they wish, and it makes up about 30
percent of the global bond market (Burch, 2018). On the other hand, a foreign bond is also a
long-term bond. It can be issued by governments or companies which are outside of their home
country. This bond is usually denominated in the currency where it is expected to be sold (Gaille,
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2018). An example of this is a company from Asia issuing a foreign bond in Great Britain, and
the bond will be issued in British pounds (Burch, 2018). Moreover, this bond may be subject to
disclosure requirements, trading regulations, and securities regulations as they are traded on
national markets.
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W4-4 Case Analysis (40 Points)
1. Read the below Philippine News Agency article
2. Answer the following questions:
a. What do you think is the effect of the below policy if implemented to the mortgage
markets and other financial markets? Discuss.
There would be advantages and disadvantages if the '7-Day Takeout Policy' will
be implemented on the guidelines and extensive verification processes for borrowers.
Some of the advantages of the takeout policy are mentioned in the article, first is, it
would drastically reduce the waiting time for loan approval, which currently stretches
from three to four months. Second, it also stated that housing development can also help
jumpstart economic activity through employment generation, consumption, and indirect
tax income. Furthermore, according to Aditya Birla Capital (2019), there are benefits to
having a housing loan that can be associated with the takeout policy. These benefits are
housing loan makes it easier for an average middle-class salaried person to afford to buy
a home of their own, a cost-effective way of availing credit, and guarantees the safety of
the property which means ensuring that the property you invest in is free of any legal
issues, and it increases the loan eligibility. On the other hand, Aditya Birla Capital (2019)
also provides disadvantages that can also be connected to the takeout policy. First, it is
considered a big commitment because once the lender approves your home loan
application, you are making a huge commitment and preparedness to control your
expenses and repayment for a long period even though the application process will only
last for seven days. The next one is, it still carries risks, for example, in case you fail to
repay the loan, the lender has the authority to take over the property and sell it to gain
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back the money they lent you as a home loan. Lastly, when you apply for a loan,
irrespective of big or small the loan amount is or how long or short the duration is, as you
continue to repay the amount, you lose the opportunity to invest the same amount in an
investment tool that could yield you valuable returns. It is quite clear that the 7-Day
Takeout Policy has both benefits as well as a few drawbacks so I think people need to
fully understand not only its advantages but also its downside.
MANILA – Filipinos may soon be able to secure a housing loan within just seven days as presidential
frontrunner Ferdinand “Bongbong” Marcos Jr. is bent to revive an initiative to address the ballooning
housing backlog in the country.
Previously implemented by the Home Development Mortgage Fund (HDMF), more commonly known
as Pag-IBIG Fund, the '7-Day Takeout Policy' will shorten the low-cost housing loan application
process.
"We recognize every Filipino family's desire to have a decent and safe home. We will strive to provide
the Filipino worker with a dwelling that will restore his dignity and his hope for a better future,"
Marcos said in a news release on Sunday.
It can be recalled that Pag-IBIG was established by then-president Ferdinand Marcos in 1978 through
Presidential Decree No. 1530 specifically to address the need for a national savings program and
financing for affordable homes for Filipino workers.
The takeout policy would drastically reduce the waiting time for loan approval, which currently
stretches from three to four months.
Government data show that the total housing needs of the country will hit 6.8 million units by the end
of 2022 and could swell to 22 million units by the year 2040 if left unattended.
According to the Philippine Statistics Authority (PSA), the country's official total population as of
May 1, 2020, has reached 109.0 million, equivalent to almost 24.8 million households with an
average family size of 4.4 members.
The economic or low-cost housing segment is those units with a selling price of PHP580,000 to
PHP1.7 million.
Meanwhile, socialized housing projects cost no more than PHP580,000 for horizontal development
and PHP750,000 for vertical development.
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"Unlike previous efforts, we will endeavor a whole of society approach to tackle our growing housing
problem. We need to have a convergence between all stakeholders as we institute regulatory and
policy reforms," Marcos added.
Apart from providing Pinoys a decent living, housing development can also help jumpstart economic
activity through employment generation, consumption, and indirect tax income.
Its downstream effects on 80 industries also bode well for our bid to recover from the negative
impact of the Covid-19 pandemic. (PR)
Source : https://www.pna.gov.ph/articles/1171901
REFERENCES:
Aditya Birla Capital (2019). Knowing the Advantages and Disadvantages of Availing a Home
Loan. Retrieved from https://www.adityabirlacapital.com/abc-of-money/advantages-and-
disadvantages-home-loan
Bank for International Settlements (2006). Committee on the Global Financial System. Retrieved
from https://www.bis.org/publ/cgfs26.pdf
Burch, K. (2018). Euro Bond vs. Foreign Bond. Retrieved from
https://budgeting.thenest.com/buy-bonds-other-countries-29771.html
Gaille, L. (2018). Difference between Foreign Bonds and Eurobonds – Characteristics and
Examples. Retrieved from https://vittana.org/difference-between-foreign-bonds-and-
eurobonds-characteristics-and-examples
Maverick, J. V. (2021). The most Important Factors Affecting Mortgage Rates. Retrieved from
https://www.investopedia.com/mortgage/mortgage-rates/factors-affect-mortgage-rates/
Robinsons Bank (n.d.). Quick Guide to Home Loan. Retrieved from
https://www.robinsonsbank.com.ph/loans/consumer-loans/housing-loan/