07 Task Performance 1

BM2004
NAME: BUSCAYA, JACKY L. DATE: SCORE:
I. MULTIPLE CHOICE (10 points: 10 items x 1 point)

ENCIRCLE the letter of the correct answer among the given choices.
1. It serves as proof that the person invested in the trust fund, and that he/she is entitled to
proportionate gains and losses.
a. Unit of Shares c. Prospectus
b. Unit of Participation d. Account Value
2. It is a document that shares information about the investment objectives, risks, costs, and other
policies.
3. It is the saving component of a variable unit life insurance (VUL).

4. It is a type of collective investment scheme (CIS) that allow investors to sell the shares back to the
fund at any time.
a. Open-end c. Corporate structure
b. Closed-end d. Contractual structure
5. It is a CIS that is organized under a contract such as trust indenture or as an investment component
of an insurance contract.
a. Open-end c. Corporate structure
b. Closed-end d. Contractual structure
6. All of the following are examples of an open-end CIS, EXCEPT:
a. Initial Public Offering (IPO) d. Unit Investment Trust Funds (UITFs)
b. Mutual Funds (MFs) e. Exchange-Traded Funds (ETFs)
7. Which of the following is INCORRECT about mutual funds (MFs)?
a. The price per share of an MF is equal to the net asset value per unit (NAVpU).
b. They are engaged in the business of investing, reinvesting, and/or trading securities.
c. They pool funds from the public and these funds will now be managed by fund managers.
d. The investors can also earn through the dividends declared by the fund, assuming the fund
has a dividend-paying feature.
8. Which of the following is CORRECT about variable universal life insurance (VUL)?
a. It is permanent life insurance because it expires.
b. It earns through the guaranteed returns of an investment fund.
c. It is a term life insurance because it covers a lifespan and does not need to be renewed.
07 Task Performance 1 *Property of STI

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BM2004
d. It is typically more expensive because it would require the policyholder to regularly pay the
premium.
9. Which of the following is INCORRECT about direct investments?
a. It can be applied in a single or a portfolio of assets.
b. It may be burdensome if done in numerous transactions.
c. It is more attractive for individual buyers as investments come in large volumes.
d. It allows an investor to choose an asset according to criteria such as location, asset type,
and strategy.
10. All of the following are requisites of a contractual collective investment scheme (CIS), EXCEPT:
a. It issues a unit of participation or shares, each of which represents an undivided interest in
a pool of investment assets.
b. It is in the form of a stock corporation that is engaged in the business of investing,
reinvesting, and/or trading securities.
c. It is organized under a contract such as a trust indenture, or as an investment component
of an insurance contract.
d. Its units or shares should be tradeable in the stock exchange to make it more liquid.
II. PROBLEM-SOLVING (10 points: 2 items x 5 points)

Analyze each given problem and solve for what is asked.
1. A unit investment trust fund (UITF) consists of various corporate stocks with a total asset value of
P450 million at the beginning of the year. At the end of the year, prices of the stocks are down by
5%, and dividends received for the year amounted to P12 million. Expenses are equal to 1.5% of total
asset value at the end of the year. The total unit of participation amounted to 3 million.
Assuming that Kim Junkyu invested P500,000 in the above UITF, how much is his unit of participation?

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BM2004
2. A unit mutual fund (MF) consists of various corporate stocks with a total asset value of P650 million
at the beginning of the year. At the end of the year, prices of the stocks went up by 5% and
dividends received for the year amounted to P6 million. Expenses are equal to 3% of total asset
value at the end of the year and the total outstanding shares are 8 million. How much is the net
asset value per share (NAVpS) of the MF?

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BM2004
III. CASE ANALYSIS (10 points: 2 items x 5 points)

Analyze the cases and answer the given question.
1. Arya Stark is a manager in Paper and Cuts Corporation (PCC). She earns a monthly compensation
income of P50,000. To increase her earnings, Arya wanted to invest 20% of her income. One of her
investment objectives is to have control of the asset. Which investments should Arya take, direct or
indirect? If indirect, what specific type of collective investment scheme (CIS)? Justify your answer in
no more than three (3) sentences.
 Arya Stark would be better off making a direct investment. One of Arya's goals is control over the asset, and a
direct investment gives a direct investor the power to oversee and take responsibility for the asset. Naturally,
there are risks associated with direct investments that investors need to be aware of in order to minimize.
2. Jon Snow Corporation is one of the leading manufacturers of ice cream in the country. It has an
equity of P100 million. Currently, it holds an investment in Sansa Stark Corporation for an amount of
P20 million. The company wanted to invest an additional P100 million. However, it wanted to
diversify its investments to reduce the risks. Moreover, it plans to seek a third party which is duly
regulated by the Securities and Exchange Commission (SEC) to manage the investments. What type
of investments Jon Snow Corporation will probably take, direct or indirect? If indirect, what specific
type of collective investment scheme (CIS)? Justify your answer in no more than three (3) sentences.
 Indirect Investment Jon Snow Corporation needs to select mutual funds since they provide investors with an
easy and quick option to diversify their holdings. Mutual funds are governed by the Securities and Exchange
Commission (SEC), and only companies listed on the Philippine Stock Exchange (PSE) are available for
purchase. Mutual funds include some risk, but if the company has a long investment horizon, they will
accumulate a significant amount of wealth.
3. Tyrion Lannister wanted to invest some of his earnings. However, he is risk-averse, and he wanted
that a bank or trust corporation shall manage his future investments. What type of investments will
Tyrion Lannister probably take, direct or indirect? Which asset class is most appropriate for him,
money market, bonds, balanced, or equity funds? Justify your answer in no more than three (3)
sentences?
 Because risk-averse investors favor low-return investments with known hazards over higher-return investments
with unknown dangers, he should allocate a portion of his earnings to indirect investments such as Unit
Investment Trust Funds (UITF). The UITF is unlimited, according to another perspective. The main idea is
that anyone can invest and take their money out whenever they want. The UITF makes money by buying stocks
and bonds that are negotiated on behalf of investors by a fund manager. For investors who are risk averse,
certificates of deposit (CDs), corporate bonds, and savings accounts are common options. The aforementioned
virtually ensures that the investor will still have access to the money when they choose to take it out.

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BM2004
Rubric for grading the computation:

CRITERIA POINTS
Complete solution with the correct answer 5
The last two (2) major steps of the solution are incorrect 4
Half of the solution is correct 3
The first two (2) major steps of the solution are correct 2
The first major step of the solution is correct 1
Rubric for grading the essay:

CRITERIA PERFORMANCE INDICATORS POINTS
Content The answer is based on underlying financial and economic principles and is supported 3
by real-life examples.
Organization of The answer is concise, well-organized, and direct to the point. 2
Ideas
Total 5

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BM2004

NAME: BUSCAYA, JACKY L. DATE: SCORE:

I. MULTIPLE CHOICE (10 points: 10 items x 1 point)

3. It is the saving component of a variable unit life insurance (VUL).

07 Task Performance 1 *Property of STI

II. PROBLEM-SOLVING (10 points: 2 items x 5 points)

07 Task Performance 1 *Property of STI

07 Task Performance 1 *Property of STI

III. CASE ANALYSIS (10 points: 2 items x 5 points)

07 Task Performance 1 *Property of STI

Rubric for grading the computation:

Rubric for grading the essay:

07 Task Performance 1 *Property of STI

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