SEC Phase 2-7C Fixed Income Market Salesman (FIMS) Exam — Philippines

Which of the following describes the key characteristics of Philippine Treasury Bills (T-bills)?

• AShort-term debt instruments issued at a discount with maturities of 91, 182, and 364 days
• BMedium-term debt instruments paying semi-annual coupons with maturities of 2 to 5 years
• CLong-term debt instruments issued at par paying quarterly interest with maturities of 10…
• DZero-coupon securities issued by private corporations with maturities of up to 270 days

What is the standard coupon payment frequency for Philippine Treasury Bonds (T-bonds) issued in the primary market?

• AMonthly
• BQuarterly
• CSemi-annually
• DAnnually

Retail Treasury Bonds (RTBs) are specifically structured to target retail investors. Which of the following is a distinguishing feature of RTBs compared to regular Treasury Bonds?

• AThey are tax-exempt for all types of individual and corporate investors
• BThey have a lower minimum investment denomination, typically PHP 5,000, and pay quarterly…
• CThey are non-negotiable and cannot be traded in the secondary market
• DThey are issued exclusively in foreign currencies such as USD or EUR

Which of the following statements regarding Retail Dollar Bonds (RDBs) issued by the Philippine government is correct?

• AThey must be purchased and settled exclusively in Philippine Pesos
• BThey are US dollar-denominated securities designed to provide retail investors a low-barr…
• CThey are sold only to institutional buyers and qualified institutional buyers (QIBs)
• DThey carry a variable interest rate linked directly to the BSP overnight rate

Which agency is responsible for issuing sovereign debt securities, conducting government securities auctions, and managing the public debt of the Philippines?

• ASecurities and Exchange Commission (SEC)
• BBangko Sentral ng Pilipinas (BSP)
• CBureau of the Treasury (BTr)
• DPhilippine Dealing & Exchange Corp. (PDEx)

In a primary market auction for Philippine Government Securities, how does the competitive bidding process function?

• APrimary Dealers submit bids specifying the volume they wish to buy and the desired yield,…
• BRetail investors submit bids through commercial banks specifying the maximum price they a…
• CPrimary Dealers submit bid yields, and the BTr accepts all bids that match the prevailing…
• DThe BSP determines the allocation prior to the auction based on the reserve requirements…

What yield is applied to non-competitive bids accepted in a Bureau of the Treasury (BTr) primary auction?

• AThe highest competitive yield accepted (cut-off yield)
• BThe lowest competitive yield submitted in the auction
• CThe weighted average yield of all accepted competitive bids
• DA fixed yield set by the BTr prior to the opening of the bidding window

Under what circumstance is the BTr Auction Committee most likely to reject bids or declare a failed auction?

• AIf the total volume of bids submitted is less than three times the offered amount
• BIf the bid yields submitted by GSEDs are unacceptably high compared to secondary market l…
• CIf the currency exchange rate fluctuates by more than 1% on the day of the auction
• DIf the non-competitive bids exceed 5% of the total auction size

What is the primary function of the Registry of Scripless Securities (RoSS) maintained by the Bureau of the Treasury?

• ATo trade corporate bonds and equities in the secondary market
• BTo act as the official electronic registry and legal book of record for ownership of gove…
• CTo clear and settle all cash payments for interbank transactions
• DTo register salesman licenses for fixed income professionals

How are securities accounts structured in the Registry of Scripless Securities (RoSS) to protect client assets?

• AAll securities are pooled in a single omnibus account under the BTr's name
• BDealers must maintain separate proprietary accounts (Sponsor Accounts) and segregated cli…
• CClient securities are registered in physical paper certificate form rather than book-entry
• DSecurities are registered under the clearing bank's asset account without reference to th…

Which of the following describes the relationship between the Registry of Scripless Securities (RoSS) and a third-party securities custodian registered with the BSP and SEC?

• ACustodians completely bypass RoSS and maintain their own independent registries of govern…
• BCustodians hold a master account in RoSS and maintain detailed sub-ledgers identifying in…
• CRoSS requires individual investors to directly open personal accounts at the BTr instead…
• DCustodians are only permitted to hold corporate bonds, while government securities must r…

When a secondary market trade of government securities is executed on the Philippine Dealing Exchange (PDEx), how is the securities transaction finalized?

• ABy the physical delivery of paper bond certificates between the trading desks within 5 bu…
• BVia electronic debit and credit instructions sent to the Registry of Scripless Securities…
• CBy transferring the cash leg through PDEx, while the security remains registered under th…
• DThrough a manual endorsement on the back of a master certificate kept at the SEC main off…

What role does the Philippine Dealing & Exchange Corp. (PDEx) play in the Philippine fixed income market?

• AIt is the primary issuer of sovereign treasury bonds and treasury bills
• BIt operates the SEC-licensed organized market and trading platform for secondary market t…
• CIt acts as the central tax withholding agent for all bond interest payments
• DIt is the regulatory body responsible for licensing fixed income salesmen

What is the standard board lot size for trading Government Securities on the Philippine Dealing Exchange (PDEx)?

• APHP 5,000
• BPHP 100,000
• CPHP 500,000
• DPHP 1,000,000

What is the standard settlement cycle for secondary market transactions of Philippine Government Securities traded on PDEx?

• AT+0 (Same day)
• BT+1 (Next business day)
• CT+2 (Second business day)
• DT+3 (Third business day)

What is the standard settlement cycle for secondary market transactions of Philippine Corporate Bonds traded on PDEx?

• AT+0 (Same day)
• BT+1 (Next business day)
• CT+2 (Second business day)
• DT+3 (Third business day)

Which of the following describes the Delivery-versus-Payment (DvP) settlement mechanism used in the Philippine fixed income market?

• AThe buyer pays for the securities first, and the seller has up to 48 hours to deliver the…
• BThe seller transfers the securities first, and the buyer is invoiced to pay by the end of…
• CA settlement process where the transfer of securities in RoSS occurs if and only if the c…
• DSecurities are delivered physically to the SEC while the cash is wired directly to the BSP

Which system is operated by the Bangko Sentral ng Pilipinas (BSP) to clear and settle the cash leg of fixed income transactions on a real-time gross settlement (RTGS) basis?

• APhilippine Clearing House Corporation (PCHC)
• BPhilPaSS (Philippine Payment and Settlement System)
• CPDTC (Philippine Depository & Trust Corp.)
• DRoSS Payment Engine

Which of the following describes the key legal and structural characteristics of Commercial Papers (CPs) in the Philippine financial market?

• AShort-term unsecured debt instruments issued by creditworthy corporations with a maximum…
• BLong-term collateralized notes issued by banks to meet capital adequacy ratios
• CEquity-linked securities that pay interest indexed to the inflation rate
• DGovernment-guaranteed certificates of deposit with maturities exceeding 5 years

In the Philippine money market, what day count convention is standard for calculating interest on short-term money market instruments like Certificates of Deposit and Interbank Call Loans?

• AActual/365
• BActual/360
• C30/360
• DActual/Actual

What is the primary function of the Interbank Call Loan (IBCL) market in the Philippines?

• ATo allow retail investors to borrow cash using government bonds as collateral
• BTo enable commercial banks to borrow from or lend cash to each other overnight to manage…
• CTo provide long-term development funding for public infrastructure projects
• DTo trade foreign currencies directly between local companies and the BSP

Which of the following correctly describes the cash flows and structure of a standard Repurchase Agreement (Repo)?

• AA transaction where a borrower sells securities to a lender and simultaneously agrees to…
• BA long-term loan where the borrower pays quarterly coupons and amortizes the principal ov…
• CA contract where the buyer purchases a call option on government bonds and pays a premium
• DThe deposit of cash at the central bank with no collateral exchange

What is the purpose of the BSP's overnight repurchase and reverse repurchase facilities under its Interest Rate Corridor (IRC) framework?

• ATo issue primary government treasury bonds and manage BTr cash reserves
• BTo manage liquidity in the banking system by setting policy rates that anchor short-term…
• CTo trade foreign exchange futures contracts and peg the value of the Philippine Peso
• DTo regulate corporate bond listings on the Philippine Stock Exchange

In a bilateral repurchase agreement, what is the purpose of applying a 'haircut' to the collateral securities?

• ATo reduce the tax rate applied to the interest income generated by the transaction
• BTo mitigate credit risk by requiring the market value of the collateral to exceed the cas…
• CTo penalize the borrower if they pre-terminate the repo before its maturity date
• DTo cover the registration fees charged by the Registry of Scripless Securities (RoSS)

Which of the following distinguishes a Tri-party Repurchase Agreement from a Bilateral Repurchase Agreement?

• AA tri-party repo involves a third-party agent (like a custodian bank) that manages collat…
• BA tri-party repo requires the SEC to act as a co-signer and guarantor of the cash repayme…
• CA tri-party repo involves three different borrowers sharing a single pool of collateral s…
• DA tri-party repo can only be conducted using physical corporate certificates and cannot i…

What is the difference between the clean price and the dirty price of a coupon-bearing bond?

• AThe dirty price includes accrued interest, while the clean price does not
• BThe clean price includes transaction fees and commissions, while the dirty price does not
• CThe clean price is the price paid by institutional buyers, while the dirty price is paid…
• DThe dirty price refers to the bond value when it trades below par, while the clean price…

If a fixed-rate bond is trading at a premium in the secondary market, how do its coupon rate, current yield, and yield to maturity (YTM) relate to one another?

• ACoupon Rate > Current Yield > Yield to Maturity
• BYield to Maturity > Current Yield > Coupon Rate
• CCurrent Yield > Coupon Rate > Yield to Maturity
• DCoupon Rate = Current Yield = Yield to Maturity

Which of the following describes the Yield to Maturity (YTM) of a bond?

• AThe annual coupon payment divided by the market price of the bond
• BThe discount rate that equates the present value of all future expected bond cash flows t…
• CThe yield calculated by assuming the bond will be pre-terminated at the earliest call date
• DThe interest rate paid by the issuer on the coupon payment dates

A Philippine corporate bond has a coupon rate of 6.00% paid semi-annually and is currently trading at a clean price of 95.00. What is the Current Yield of the bond?

• A6.00%
• B6.32%
• C3.16%
• D5.70%

For a callable bond trading at a high premium in the secondary market, why is the Yield to Call (YTC) typically a more realistic yield measure for investors than the Yield to Maturity (YTM)?

• ABecause the issuer is highly likely to call the bond early to refinance its debt at lower…
• BBecause YTC is always legally guaranteed by the SEC to be higher than YTM
• CBecause callable bonds automatically become zero-coupon bonds once they trade at a premium
• DBecause the investor has the option to force the issuer to redeem the bond at par at any…

Which of the following describes the Yield to Worst (YTW) of a bond with multiple embedded call options?

• AThe average yield calculated across all callable bonds in the same sector
• BThe lowest yield among all potential scenarios, including Yield to Maturity and Yield to…
• CThe coupon rate of the bond minus the capital gains tax rate
• DThe yield that would result if the issuer defaulted on the very first coupon payment

Which day count conventions are standard in the Philippine market for Government Securities versus Corporate Bonds?

• AActual/365 for Government Securities and 30/360 for Corporate Bonds
• BActual/360 for Government Securities and Actual/365 for Corporate Bonds
• C30/360 for Government Securities and Actual/365 for Corporate Bonds
• DActual/Actual for both Government Securities and Corporate Bonds

An investor purchases a Philippine Treasury Note with a par value of PHP 1,000,000 and a semi-annual coupon of 5.00%. If there are 73 actual days elapsed since the last coupon payment, what is the Accrued Interest using the Actual/365 day count convention?

• APHP 10,000
• BPHP 5,000
• CPHP 25,000
• DPHP 7,300

An investor buys a Philippine Corporate Bond with a par value of PHP 1,000,000 and an annual coupon of 6.00% paid semi-annually. The trade settles on September 15, and the last coupon payment was on July 15 of the same year. Using the 30/360 day count convention, what is the Accrued Interest?

• APHP 10,000
• BPHP 10,192
• CPHP 5,000
• DPHP 15,000

Calculate the price (purchase proceeds) of a 91-day Philippine Treasury Bill with a face value of PHP 10,000,000 that is trading at a discount rate of 4.50% using the Actual/360 day count convention.

• APHP 9,886,250
• BPHP 9,887,500
• CPHP 9,550,000
• DPHP 9,889,041

A 182-day Philippine Treasury Bill is trading in the secondary market at a price of 97.50 per 100 face value. What is its annualized Investment Yield (also known as the Bond Equivalent Yield) using the Actual/365 day count convention?

• A5.14%
• B5.00%
• C5.07%
• D5.21%

If a 90-day Treasury Bill with a face value of PHP 1,000,000 has a discount rate of 5.00%, what is its equivalent simple annual yield (using Actual/360 for comparison)?

• A5.00%
• B5.06%
• C5.13%
• D4.94%

What is the relationship between Macaulay Duration and Modified Duration for a bond that pays semi-annual coupons?

• AModified Duration = Macaulay Duration / (1 + YTM / 2)
• BModified Duration = Macaulay Duration * (1 + YTM)
• CModified Duration = Macaulay Duration / (1 + YTM)
• DModified Duration = Macaulay Duration * (1 + YTM / 2)

A corporate bond portfolio has a Modified Duration of 6.50 years. If market interest rates (YTM) increase by 50 basis points (0.50%), what is the approximate percentage change in the price of the portfolio?

• AIncrease of 3.25%
• BDecrease of 3.25%
• CDecrease of 13.00%
• DIncrease of 6.00%

The Price Value of a Basis Point (PVBP or DV01) of a bond is PHP 800 per PHP 10,000,000 par value. If the yield to maturity of this bond decreases by 15 basis points, what is the estimated dollar price change per PHP 10,000,000 par value?

• AIncrease of PHP 12,000
• BDecrease of PHP 12,000
• CIncrease of PHP 8,000
• DIncrease of PHP 1,200

Which of the following statements regarding bond convexity is correct?

• AConvexity is a linear measure of the relationship between bond prices and yields
• BConvexity accounts for the curvature of the price-yield relationship and improves price c…
• CHigher convexity is disadvantageous to investors because it decreases bond price gains wh…
• DConvexity is only positive for callable bonds when interest rates are extremely low

Which yield curve theory asserts that long-term interest rates are determined solely by the market's expectation of future short-term interest rates, with no premium required for holding longer maturities?

• ALiquidity Preference Theory
• BPreferred Habitat Theory
• CPure Expectations Hypothesis
• DMarket Segmentation Theory

What does an inverted yield curve typically indicate about market expectations and the economic outlook?

• AExpectations of rising inflation and accelerating economic growth
• BExpectations of falling interest rates, economic slowdown, or potential recession in the…
• CA stable economic environment with no anticipated changes in central bank policy
• DAn immediate shortage of long-term government bonds relative to short-term commercial pap…

In the Philippine fixed income market, what is the Bloomberg Valuation (BVAL) reference rate, and how is it used?

• AIt is a sovereign credit rating scale published weekly by Bloomberg Philippines
• BIt is the official secondary market pricing benchmark for government securities, calculat…
• CIt is a fixed rate set by the SEC to limit trading spreads on corporate bonds
• DIt is the overnight interest rate at which banks borrow reserves from the BSP

Calculate the Modified Duration of a bond with a Macaulay Duration of 5.80 years and a yield to maturity (YTM) of 6.00%, assuming the bond pays coupons semi-annually.

• A5.63 years
• B5.47 years
• C5.80 years
• D6.15 years

A Philippine sovereign bond has a Modified Duration of 8.00 years and a Convexity of 100. If interest rates increase by 100 basis points (1.00% or 0.01), what is the estimated percentage change in the price of the bond including the convexity adjustment?

• A-7.50%
• B-8.00%
• C-8.50%
• D-7.00%

A 2-year zero-coupon bond with a face value of PHP 1,000,000 is currently trading at a price of PHP 890,000. What is the semi-annually compounded yield to maturity (YTM) of this bond?

• A5.91%
• B5.83%
• C6.02%
• D2.96%