Chapter 1

LMN Corporation has a $60 par, 4% preferred stock currently trading at $45 per share. Its annual dividend is:

A. 1.80 B. 4 C. 24 D. 2.40 Answer: D; .04 x $60

Rules to protect the public during IPO include all of the following except:

A. Members may not withhold shares for their own benefit B. Shares may not be held to reward others who can direct business to the member C. Shares must be offered to the public at the public offering price. D. Members cannot take advantage of their insider status to gain access to shares for their own benefit Answer: B

A customer investing in common equity could realize all of the following except:

A. Protection of principal investment B. Potential hedge against inflation C. Potential capital appreciation D. Current income via dividend declarations Answer: A

As interests rates rise, prices of preferred stock will:

A. Rise B. Become volatile C. Remain unaffected D. Fall Answer : D

Which of the following sell transactions is not subject to the holding period restriction specified in SEC Rule 144?

A. Stock acquired on the NYSE by a corporate affiliate B. Unregistered stock acquired by a corporate affiliate in a stock option program C. Stock acquired by a corporate affiliate in a private placement. D. Unregistered stock acquired by a nonaffiliated under an investment letter. Answer: A

The rate on an adjustable preferred stock would most likely be indexed to:

A. The T-Bill rate B. The Dow C. The Producer Price Index (PPI) D. The Consumer Price Index (CPI) Answer: A

An officer of a public company buys 1,000 shares of the company's registered stock in the open market. Regarding the sale these shares, the officer may sell:

A. Under rule 144 only after a 6 month holding period B. Only after leaving (becoming unaffiliated with) the company C. Immediately, subject to rule 144 volume limitations D. Immediately, with no volume limitations Answer: C

A preferred stock dividend is stated as a percentages of:

par value