Philippines SEC Certification Program Exam Questions and Answers
Question 1. A one-period project requires an initial outlay of ■120,000.00 and is expected to pay ■90,000.00 one
year later. At a discount rate of 10.0%, what is the NPV?
A. ■38,181.82
B. ■-38,181.82
C. ■-21,000.00
D. ■-30,000.00
Correct Answer: B. ■-38,181.82
Explanation: NPV equals the present value of future cash flows minus the initial outlay. Discounting ■90,000.00 for one year at
10.0% and subtracting ■120,000.00 gives ■-38,181.82. The undiscounted difference ignores the time value of money and
therefore is not NPV.
Question 2. Currency A is quoted at 1.0562 units of Currency B per A, and Currency B is quoted at 143.29 units of
Currency C per B. What is the implied Currency C per Currency A cross rate?
A. 151.34 units of Currency C per Currency A
B. 135.66 units of Currency C per Currency A
C. 0.0074 units of Currency C per Currency A
D. 144.34 units of Currency C per Currency A
Correct Answer: A. 151.34 units of Currency C per Currency A
Explanation: When the quotation units align, multiply the two exchange rates so that Currency B cancels. 1.0562 B/A × 143.29 C/B
= 151.34 C/A. Dividing instead of multiplying would leave the unit conversion inconsistent with the requested quotation.
Question 3. An investment strategy uses borrowing to double its economic exposure while the investor
contributes the same amount of equity capital. What is the most direct consequence?
A. Both gains and losses on the exposed position can be magnified relative to the investor's equity.
B. Borrowing guarantees a lower volatility of equity returns.
C. The investment can no longer experience a negative return.
D. The strategy eliminates market risk because borrowed funds diversify the position.
Correct Answer: A. Both gains and losses on the exposed position can be magnified relative to the investor's equity.
Explanation: Leverage increases economic exposure relative to the investor's own capital. As a result, favorable market moves
can increase returns on equity, while adverse moves can magnify losses and may trigger financing or margin requirements.
Leverage changes the scale of exposure; it does not eliminate the underlying market risk.
Question 4. Which of the following best describes Market maker?
A. The market in which investors trade previously issued securities with other investors.
B. The lowest price a seller is currently willing to accept for a security.
C. The highest price a buyer is currently willing to pay for a security.
D. A participant that stands ready to quote buy and sell prices and provide liquidity.
Correct Answer: D. A participant that stands ready to quote buy and sell prices and provide liquidity.
Explanation: Market maker is best understood as a participant that stands ready to quote buy and sell prices and provide liquidity.
This interpretation is consistent with the way the concept is applied in professional securities and investment practice, including
activity overseen by Philippines Securities and Exchange Commission (SEC). The other choices describe different concepts or
would lead to a materially different risk, trading, valuation, or compliance conclusion.
Page 1
,Question 5. In the context of Philippine securities and fixed-income markets, which statement about Forward
foreign exchange is most accurate?
A. A participant that stands ready to quote buy and sell prices and provide liquidity.
B. An exchange rate between two currencies derived from their respective rates against a third currency.
C. An agreement today to exchange currencies on a future value date at an agreed rate.
D. The process of comparing records to identify and resolve breaks or mismatches.
Correct Answer: C. An agreement today to exchange currencies on a future value date at an agreed rate.
Explanation: Forward foreign exchange is best understood as an agreement today to exchange currencies on a future value date
at an agreed rate. This interpretation is consistent with the way the concept is applied in professional securities and investment
practice, including activity overseen by Philippines Securities and Exchange Commission (SEC). The other choices describe
different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 6. A bond has a face value of ■1,000.00, an annual coupon rate of 3.0%, and a market price of ■1,120.00.
What is its current yield?
A. 3.00%
B. -10.71%
C. 4.00%
D. 2.68%
Correct Answer: D. 2.68%
Explanation: Current yield equals annual coupon cash flow divided by current market price, so the numerator is ■30.00. Dividing
by ■1,120.00 gives 2.68%. Current yield is not the coupon rate and it is not yield to maturity because it ignores the timing and
amount of the redemption cash flow.
Question 7. Under a stated convention, a company has debt of 60 million and shareholders' equity of 75 million.
What is its debt-to-equity ratio?
A. 1.80
B. 1.25
C. 0.80
D. -0.20
Correct Answer: C. 0.80
Explanation: Debt-to-equity compares the specified debt balance with shareholders' equity. Using the stated convention, =
0.80. Analysts should verify the precise debt definition before comparing companies because some conventions include or exclude
particular liabilities.
Question 8. A bond portfolio has modified duration of 5.0. If its yield rises by 0.75 percentage point(s), what is the
approximate percentage price change using duration only?
A. -0.75%
B. -5.00%
C. -3.75%
D. 3.75%
Correct Answer: C. -3.75%
Explanation: The duration approximation is percentage price change ≈ -modified duration × change in yield expressed as a
decimal. Applying 5.0 to a 0.75-percentage-point yield move gives approximately -3.75%. This is a first-order estimate and ignores
convexity, so it is most reliable for relatively small yield changes.
Page 2
,Question 9. A rights issue allows shareholders to buy 1 new share at ■55.00 for every 2 existing shares. The
shares trade at ■60.00 immediately before the theoretical ex-rights adjustment. Ignoring market effects, what is
the theoretical ex-rights price?
A. ■58.33
B. ■5.00
C. ■56.67
D. ■57.50
Correct Answer: A. ■58.33
Explanation: The theoretical ex-rights price is the combined value of 2 old shares plus the subscription cash for one new share,
divided by 3 total shares. (2 × 60 + 55) / 3 = ■58.33. This is a theoretical dilution calculation and actual market prices can differ
because of expectations, frictions, and changing information.
Question 10. Which of the following best describes Concentration risk?
A. The risk that a borrower or counterparty will fail to meet contractual obligations.
B. The risk of loss from changes in market prices, rates, spreads, or volatility.
C. The risk arising from excessive exposure to a single issuer, sector, asset class, or correlated group.
D. Issuer- or asset-specific risk that can generally be reduced through diversification.
Correct Answer: C. The risk arising from excessive exposure to a single issuer, sector, asset class, or correlated group.
Explanation: Concentration risk is best understood as the risk arising from excessive exposure to a single issuer, sector, asset
class, or correlated group. This interpretation is consistent with the way the concept is applied in professional securities and
investment practice, including activity overseen by Philippines Securities and Exchange Commission (SEC). The other choices
describe different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 11. A repo has cash principal of ■5,000,000.00, an annual repo rate of 7.0%, and a term of 14 days on an
assumed 360-day basis. What is the repo interest?
A. ■13,611.11
B. ■350,000.00
C. ■13,424.66
D. ■5,013,611.11
Correct Answer: A. ■13,611.11
Explanation: Simple repo interest on the stated convention is principal × annual rate × days / day-count basis. Using 14/360 gives
interest of ■13,611.11. The repurchase amount would normally include both principal and interest, but the question asks for the
interest component only.
Question 12. An investment earns a nominal return of 6.0% while inflation is 4.0%. Using the exact Fisher
relationship, what is the real return?
A. 10.00%
B. 66.67%
C. 1.92%
D. 2.00%
Correct Answer: C. 1.92%
Explanation: The exact real return is (1 + nominal return) / (1 + inflation) - 1. Using the stated values gives 1.92%. Simply
subtracting inflation from nominal return is a useful approximation at low rates, but it is not the exact calculation requested.
Page 3
, Question 13. An investor buys a put with strike ■125.00 for a premium of ■9.00 per unit. Ignoring transaction
costs, what is the breakeven underlying price at expiration?
A. ■134.00
B. ■125.00
C. ■116.00
D. ■9.00
Correct Answer: C. ■116.00
Explanation: A long put breaks even at expiration when the put's intrinsic value equals the premium paid. The breakeven is strike
minus premium, or ■125.00 - ■9.00 = ■116.00. A lower underlying price increases the long put's expiration profit after the
breakeven is crossed.
Question 14. An investment has a 30% probability of returning -5.0% and a 70% probability of returning 20.0%.
What is the expected return?
A. 25.00%
B. 7.50%
C. 2.50%
D. 12.50%
Correct Answer: D. 12.50%
Explanation: Expected return is the probability-weighted average of the possible outcomes. The calculation is 0.30 × -5.0% + 0.70
× 20.0% = 12.50%. A simple average would ignore the fact that the two outcomes do not have equal probabilities.
Question 15. An investor buys a share for ■60.00 and also buys a put with strike ■50.00 for ■5.00. Ignoring costs
and dividends, what is the maximum loss per share at expiration?
A. ■10.00
B. ■45.00
C. ■15.00
D. ■5.00
Correct Answer: C. ■15.00
Explanation: The protective put establishes a minimum sale value equal to the put strike at expiration. Maximum loss is stock cost
plus put premium minus strike: 60 + 5 - 50 = ■15.00. The premium is part of the cost of protection and therefore increases the
maximum loss relative to stock price minus strike alone.
Question 16. A pooled fund reports assets of ■120,000,000.00, liabilities of ■3,000,000.00, and 10 million units
outstanding. What is the fund's NAV per unit?
A. ■11.70
B. ■0.30
C. ■12.30
D. ■12.00
Correct Answer: A. ■11.70
Explanation: Net asset value equals assets minus liabilities, divided by units outstanding. Here the net assets are
■117,000,000.00, which produces an NAV per unit of ■11.70. Using gross assets would overstate value because fund liabilities
belong in the NAV calculation.
Page 4
Question 1. A one-period project requires an initial outlay of ■120,000.00 and is expected to pay ■90,000.00 one
year later. At a discount rate of 10.0%, what is the NPV?
A. ■38,181.82
B. ■-38,181.82
C. ■-21,000.00
D. ■-30,000.00
Correct Answer: B. ■-38,181.82
Explanation: NPV equals the present value of future cash flows minus the initial outlay. Discounting ■90,000.00 for one year at
10.0% and subtracting ■120,000.00 gives ■-38,181.82. The undiscounted difference ignores the time value of money and
therefore is not NPV.
Question 2. Currency A is quoted at 1.0562 units of Currency B per A, and Currency B is quoted at 143.29 units of
Currency C per B. What is the implied Currency C per Currency A cross rate?
A. 151.34 units of Currency C per Currency A
B. 135.66 units of Currency C per Currency A
C. 0.0074 units of Currency C per Currency A
D. 144.34 units of Currency C per Currency A
Correct Answer: A. 151.34 units of Currency C per Currency A
Explanation: When the quotation units align, multiply the two exchange rates so that Currency B cancels. 1.0562 B/A × 143.29 C/B
= 151.34 C/A. Dividing instead of multiplying would leave the unit conversion inconsistent with the requested quotation.
Question 3. An investment strategy uses borrowing to double its economic exposure while the investor
contributes the same amount of equity capital. What is the most direct consequence?
A. Both gains and losses on the exposed position can be magnified relative to the investor's equity.
B. Borrowing guarantees a lower volatility of equity returns.
C. The investment can no longer experience a negative return.
D. The strategy eliminates market risk because borrowed funds diversify the position.
Correct Answer: A. Both gains and losses on the exposed position can be magnified relative to the investor's equity.
Explanation: Leverage increases economic exposure relative to the investor's own capital. As a result, favorable market moves
can increase returns on equity, while adverse moves can magnify losses and may trigger financing or margin requirements.
Leverage changes the scale of exposure; it does not eliminate the underlying market risk.
Question 4. Which of the following best describes Market maker?
A. The market in which investors trade previously issued securities with other investors.
B. The lowest price a seller is currently willing to accept for a security.
C. The highest price a buyer is currently willing to pay for a security.
D. A participant that stands ready to quote buy and sell prices and provide liquidity.
Correct Answer: D. A participant that stands ready to quote buy and sell prices and provide liquidity.
Explanation: Market maker is best understood as a participant that stands ready to quote buy and sell prices and provide liquidity.
This interpretation is consistent with the way the concept is applied in professional securities and investment practice, including
activity overseen by Philippines Securities and Exchange Commission (SEC). The other choices describe different concepts or
would lead to a materially different risk, trading, valuation, or compliance conclusion.
Page 1
,Question 5. In the context of Philippine securities and fixed-income markets, which statement about Forward
foreign exchange is most accurate?
A. A participant that stands ready to quote buy and sell prices and provide liquidity.
B. An exchange rate between two currencies derived from their respective rates against a third currency.
C. An agreement today to exchange currencies on a future value date at an agreed rate.
D. The process of comparing records to identify and resolve breaks or mismatches.
Correct Answer: C. An agreement today to exchange currencies on a future value date at an agreed rate.
Explanation: Forward foreign exchange is best understood as an agreement today to exchange currencies on a future value date
at an agreed rate. This interpretation is consistent with the way the concept is applied in professional securities and investment
practice, including activity overseen by Philippines Securities and Exchange Commission (SEC). The other choices describe
different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 6. A bond has a face value of ■1,000.00, an annual coupon rate of 3.0%, and a market price of ■1,120.00.
What is its current yield?
A. 3.00%
B. -10.71%
C. 4.00%
D. 2.68%
Correct Answer: D. 2.68%
Explanation: Current yield equals annual coupon cash flow divided by current market price, so the numerator is ■30.00. Dividing
by ■1,120.00 gives 2.68%. Current yield is not the coupon rate and it is not yield to maturity because it ignores the timing and
amount of the redemption cash flow.
Question 7. Under a stated convention, a company has debt of 60 million and shareholders' equity of 75 million.
What is its debt-to-equity ratio?
A. 1.80
B. 1.25
C. 0.80
D. -0.20
Correct Answer: C. 0.80
Explanation: Debt-to-equity compares the specified debt balance with shareholders' equity. Using the stated convention, =
0.80. Analysts should verify the precise debt definition before comparing companies because some conventions include or exclude
particular liabilities.
Question 8. A bond portfolio has modified duration of 5.0. If its yield rises by 0.75 percentage point(s), what is the
approximate percentage price change using duration only?
A. -0.75%
B. -5.00%
C. -3.75%
D. 3.75%
Correct Answer: C. -3.75%
Explanation: The duration approximation is percentage price change ≈ -modified duration × change in yield expressed as a
decimal. Applying 5.0 to a 0.75-percentage-point yield move gives approximately -3.75%. This is a first-order estimate and ignores
convexity, so it is most reliable for relatively small yield changes.
Page 2
,Question 9. A rights issue allows shareholders to buy 1 new share at ■55.00 for every 2 existing shares. The
shares trade at ■60.00 immediately before the theoretical ex-rights adjustment. Ignoring market effects, what is
the theoretical ex-rights price?
A. ■58.33
B. ■5.00
C. ■56.67
D. ■57.50
Correct Answer: A. ■58.33
Explanation: The theoretical ex-rights price is the combined value of 2 old shares plus the subscription cash for one new share,
divided by 3 total shares. (2 × 60 + 55) / 3 = ■58.33. This is a theoretical dilution calculation and actual market prices can differ
because of expectations, frictions, and changing information.
Question 10. Which of the following best describes Concentration risk?
A. The risk that a borrower or counterparty will fail to meet contractual obligations.
B. The risk of loss from changes in market prices, rates, spreads, or volatility.
C. The risk arising from excessive exposure to a single issuer, sector, asset class, or correlated group.
D. Issuer- or asset-specific risk that can generally be reduced through diversification.
Correct Answer: C. The risk arising from excessive exposure to a single issuer, sector, asset class, or correlated group.
Explanation: Concentration risk is best understood as the risk arising from excessive exposure to a single issuer, sector, asset
class, or correlated group. This interpretation is consistent with the way the concept is applied in professional securities and
investment practice, including activity overseen by Philippines Securities and Exchange Commission (SEC). The other choices
describe different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 11. A repo has cash principal of ■5,000,000.00, an annual repo rate of 7.0%, and a term of 14 days on an
assumed 360-day basis. What is the repo interest?
A. ■13,611.11
B. ■350,000.00
C. ■13,424.66
D. ■5,013,611.11
Correct Answer: A. ■13,611.11
Explanation: Simple repo interest on the stated convention is principal × annual rate × days / day-count basis. Using 14/360 gives
interest of ■13,611.11. The repurchase amount would normally include both principal and interest, but the question asks for the
interest component only.
Question 12. An investment earns a nominal return of 6.0% while inflation is 4.0%. Using the exact Fisher
relationship, what is the real return?
A. 10.00%
B. 66.67%
C. 1.92%
D. 2.00%
Correct Answer: C. 1.92%
Explanation: The exact real return is (1 + nominal return) / (1 + inflation) - 1. Using the stated values gives 1.92%. Simply
subtracting inflation from nominal return is a useful approximation at low rates, but it is not the exact calculation requested.
Page 3
, Question 13. An investor buys a put with strike ■125.00 for a premium of ■9.00 per unit. Ignoring transaction
costs, what is the breakeven underlying price at expiration?
A. ■134.00
B. ■125.00
C. ■116.00
D. ■9.00
Correct Answer: C. ■116.00
Explanation: A long put breaks even at expiration when the put's intrinsic value equals the premium paid. The breakeven is strike
minus premium, or ■125.00 - ■9.00 = ■116.00. A lower underlying price increases the long put's expiration profit after the
breakeven is crossed.
Question 14. An investment has a 30% probability of returning -5.0% and a 70% probability of returning 20.0%.
What is the expected return?
A. 25.00%
B. 7.50%
C. 2.50%
D. 12.50%
Correct Answer: D. 12.50%
Explanation: Expected return is the probability-weighted average of the possible outcomes. The calculation is 0.30 × -5.0% + 0.70
× 20.0% = 12.50%. A simple average would ignore the fact that the two outcomes do not have equal probabilities.
Question 15. An investor buys a share for ■60.00 and also buys a put with strike ■50.00 for ■5.00. Ignoring costs
and dividends, what is the maximum loss per share at expiration?
A. ■10.00
B. ■45.00
C. ■15.00
D. ■5.00
Correct Answer: C. ■15.00
Explanation: The protective put establishes a minimum sale value equal to the put strike at expiration. Maximum loss is stock cost
plus put premium minus strike: 60 + 5 - 50 = ■15.00. The premium is part of the cost of protection and therefore increases the
maximum loss relative to stock price minus strike alone.
Question 16. A pooled fund reports assets of ■120,000,000.00, liabilities of ■3,000,000.00, and 10 million units
outstanding. What is the fund's NAV per unit?
A. ■11.70
B. ■0.30
C. ■12.30
D. ■12.00
Correct Answer: A. ■11.70
Explanation: Net asset value equals assets minus liabilities, divided by units outstanding. Here the net assets are
■117,000,000.00, which produces an NAV per unit of ■11.70. Using gross assets would overstate value because fund liabilities
belong in the NAV calculation.
Page 4
