ORION Series 65 TEST 2 QUESTIONS

Which of the following statements accurately describes the doctrine of limited liability?

A shareholder of a corporation is not personally liable for the corporation's debts.

A company's dividend on its common stock is:

determined by its board of directors.

Under the Uniform Securities Act, all of the following persons may provide investment advice incidental to their normal business without requiring registration as an investment adviser EXCEPT a(n):

economist.

When using the Dividend Discount Model,

future expected dividends are discounted to compute the present value of the stock

An investment adviser with custody of customer funds and securities must send the customer a statement of account activity no less frequently than:

quarterly.

As interest rates fall, prices of straight preferred stock will:

rise.

Wrap fee accounts would tend to be most suitable for investors who follow a:

tactical approach to investing.

When analyzing a preferred stock, an investment adviser would give the most credence to:

the ability of the company to pay the stated dividend.

An analyst using the dividend growth model would take into account all of the following factors EXCEPT:

the current earnings per share.

A common stockholder's rights include all of the following EXCEPT:

the right to determine the par value of the stock.

Kapco Investment Advisers currently has $138 million in assets under management and has offices in Colorado and Utah. Kapco's only clients in Utah are 2 insurance companies domiciled in that state. Kapco has no office in New Mexico but does service the accounts of 3 middle-class individuals. Kapco recently has opened an advisory account for a pension plan for a corporation located in Montana. Under the Uniform Securities Act, Kapco would have to register with:

the SEC.

1996 NSMIA

"federal covered advisor"

Which of the following would meet the USA's definition of a federal covered advisor? An investment advisor who:

is registered with the SEC

A customer owns cumulative preferred stock (par value of $100) that pays an 8% dividend. The dividend has not been paid this year or for the 2 previous years. How much must the company pay the customer per share before it may pay dividends to the common stockholders?

$24.00

Board of Directors DCC omitted dividends in 2010 $100 6%

$6

A corporation with a 7% $100 par cumulative preferred paid $5 to preferred stockholders last year. Before the company can pay common dividends, how much must it pay each preferred share outstanding?

$9.00

Investing in emerging market stocks primarily exposes your client to which of the following risks?

Currency. Inflation. Liquidity. Political.

Bail Bonds, Inc., might issue warrants in connection with a bond issue for which of the following reasons?

As an inducement to make the bonds more marketable. To lower their interest cost on the issue.

All of the following pay dividends EXECPT

Warrants

An investment in which of the following would expose the investor to the greatest capital risk?

Common stock.

Which of the statements about corporate dividends are TRUE?

Dividends represent a pro rata distribution of corporate profits to shareholders. Dividends may be paid in cash, property, or stock.

Callable preferred stock is advantageous to the issuer because it allows the company to:

Replace a high fixed rate issue with a lower issue after the call date

Investing in an emerging market mutual fund subjects the investor to all of the following risks EXCEPT:

Liquidity

An investor who chooses to use preferred stock as an income source instead of bonds would potentially incur which of the following risks?

Loss of principal. Price volatility of preferred stock is closely related to interest rates. If the stock is callable, the client's income can be suddenly lowered

An investment adviser is preparing an advertisement. Which of the following would be acceptable?

Offering to provide his investment recommendations for the past 12 months. Promoting his system of charts and formulas while mentioning their limitations and difficulties.

Which of the following statements best describes cumulative preferred stock?

Owners have a continuing claim to their dividends, and all arrears must be paid before any dividends can be paid on common stock.

Which of the following statements regarding rights is TRUE?

Preferred stockholders do not have the right to subscribe to a rights offering.

All of the following statements regarding incentive stock options (ISOs) are correct EXCEPT:

The favorable tax treatment associated with the ISOs is lost if the shares acquired through the ISO exercise are sold before one year from the date of grant or two years from the date of exercise.