Unit 1: Checkpoint Exam

All of the following are considered securities except A) U.S. minted gold coins. B) 15 British pound put contracts. C) Treasury bonds. D) common stock of XYZ corporation.

A

An American depositary receipt is a A) domestic security representing a foreign security in U.S. markets. B) foreign security trading in U.S. markets. C) domestic security trading in foreign markets. D) foreign security representing a domestic security in foreign markets.

A

Jon owns 100 shares of the Bayside Fishing Company. Bayside has 1,000,000 shares outstanding and operates under a statutory voting system. At the next election for the board, there are two open seats. All of these are true except A) Jon has control of 200 votes, which he can cast any way he likes among the two open seats. B) Jon owns 1/10000 of the Bayside Fishing Company. C) Jon has control of 200 votes, and he can cast up to 100 of those votes for each open seat. D) Jon has a right to freely transfer his shares.

A

Under Rule 144, which of these sales are subject to volume limitations on the number of shares sold? I. Control person selling registered stock held for 1 year II. Control person selling restricted stock held for 2 years III. Nonaffiliate selling registered stock held for 1 month IV. Nonaffiliate selling restricted stock held for more than 6 months A) I and II B) III and IV C) I and IV D) II and III

A

Which of these securities would likely provide the greatest potential for capital appreciation? A) A common stock B) A preferred stock C) A U.S. Treasury STRIP D) A convertible bond

A

All of these dates are declared by the board of directors of a corporation except the A) record date. B) ex-dividend date. C) payable date. D) declaration date.

B

For this election cycle, Big Trucks, Inc., has three open board seats. Big Trucks operates under a cumulative voting system. Your customer owns 300 participating preferred shares of Big Trucks. He has A) 300 votes total to spread among the three open seats. B) no voting rights. C) 300 votes each for the open seats. D) 900 votes he can divide anyway he wants among the three seats.

B

In 2011, RST Corp. had both common stock and $100 par value 4% noncumulative preferred stock, outstanding. The preferred stock, like the common stock, pays dividends on a quarterly basis. Because of financial difficulties, the company stopped paying dividends after 2011. After resolving its problems in 2015, the company resumed dividend payments in 2016. Before paying the first quarterly common stock dividend that year, the company would have to pay a quarterly dividend to the preferred stockholders of A) $20.00. B) $1.00. C) $17.00. D) $4.00.

B

All of the following statements regarding penny stocks are true except A) the SEC rules require that prospects, before their initial transaction in a penny stock, be given a copy of a risk disclosure document. B) if an account holds penny stocks, broker/dealers must provide a monthly account statement to the customer. C) penny stock rules apply to both solicited and unsolicited transactions. D) established customers of the firm need not sign a suitability statement.

C

American Liquidators Corporation (the ticker is LQDT) has 100 million outstanding common shares. The company would like to raise capital by selling 100 million new shares. In order to do this they must give their existing shareholders an opportunity to buy shares sufficient to maintain the shareholders percentage of ownership. In order to accomplish this they would A) suggest that existing shareholders go to the market and double their existing position. B) perform a stock split. C) offer stock rights to existing shareholders. D) offer warrants to existing shareholders.

C

Big Company, Inc., an NYSE listed manufacturer of large objects, has declared a 50-cent-per-share-dividend payable next month. Big Company also has options available for trade. The actual ex-dividend date will be declared by A) FINRA. B) the CBOE. C) the NYSE. D) the OTC.

C

Squidco, Inc., is issuing 100 million dollars in 4 ½% bonds maturing in 20 years. When purchased at issue, the buyers will receive an additional security that allows them to purchase 20 shares of Squidco common stock at $50 a share, anytime in the next 10 years. Squidco common is currently trading at $29.95 a share. This is an example of a A) follow-on offering. B) stock right. C) warrant. D) call.

C

The United States Supreme Court decision that provided our current definition of a security is A) County of San Francisco v. State of California B) SEC v. Lorenzo C) SEC v. Howey D) Hawkins v. Florida

C

Your client holds ADRs of Daikon Motors, Inc., an automobile manufacturer based in Asia. All of these are true about the position except A) the security may be traded in U.S. markets. B) they have the right to request the underlying common shares be issued to them directly. C) they have the same voting rights as an owner of the common stock. D) they will receive dividends in U.S. dollars.

C

Equity is to debt as A) hedge fund is to mutual fund. B) stock is to preferred stock. C) stock is to mutual fund. D) stock is to bond.

D

Included under the term, equity security, would be A) debentures. B) collateral trust certificates. C) equipment trust certificates. D) participating preferred.

D

Mary owns 8% of Doyle Inc., a publicly traded publishing company. She has recently married John, a doctor who owns 3% of Doyle. John wants to sell some of his shares to pay off the debt from the wedding and honeymoon. When he does so he will need to A) not file Form 144 due to the spousal exception. B) file Form 144 because he is a doctor. C) not file Form 144 because only owns 3% and is not a control person. D) file Form 144 because he is a control person.

D

Which of these would most likely require shareholder approval? A) Declaring a dividend B) Firing the CEO C) Hiring a new CFO D) Changing the corporation's name

D

Your customer, MJ, has a strong preference for investing in equity securities; however, she is hoping to increase the amount of current income her portfolio generates. Which of these is the least suitable for her? A) Generic Motors, Inc., 4 ¾% preferred stock B) Long Beach Electric, a utility C) BuyMore, Inc., a big-box retailer with a long history of healthy dividend payments D) Duratech common stock, an exciting new tech manufacturer

D