7 Equities: Special Securities and Financial Listings

DEFF ADR represents 20% of the value of a DEFF ordinary share. The ordinary shares trade on the London Stock Exchange, where the current price is 200 British Pounds (BP). The current exchange rate for the British Pound against the U.S. Dollar is $1.40. The ordinary share pays an annualized dividend of 12 BP, with payment made semi-annually. The DEFF ADR is listed on the NYSE. If a customer places an order to buy $560,000 of the ADR on the NYSE, the customer will buy how many shares of the ADR?

10,000

Which statement is TRUE about American Depositary Receipts?

ADR market prices are subject to foreign currency exchange fluctuations

All of the following statements are true regarding the trading of ADRs EXCEPT:

ADRs are traded on the Chicago Board Options Exchange

Which of the following actions taken by a corporation will raise additional capital?

Announcement of a rights distribution allowing existing shareholders to buy the additional stock

Which statement is TRUE regarding ADRs?

Dividends are declared by the issuer of the underlying stock in the foreign currency while investors receive dividend payments in U.S. dollars

Which of the following are equity security holders of a company? I Common shareholders II Preferred Shareholders III Convertible Bondholders IV Warrant Holders

I and II

Which statements are TRUE about the time value and intrinsic value of rights and warrants when issued? I Warrants have time value but not intrinsic value II Warrants have intrinsic value but not time value III Rights have time value but not intrinsic value IV Rights have intrinsic value but not time value

I and IV

The exercise price of a warrant is set at issuance at:

a premium to the market price of the common stock

A company's common stock is selling in the market at a "multiple of 10". If the market price of the common stock is currently $10, which statement is TRUE?

The company has earnings per share of $1 this year

Which statement is TRUE about the time value and intrinsic value of rights and warrants when issued?

Warrants have time value and rights have intrinsic value at issuance

All of the following statements about warrants are true EXCEPT?

Warrants typically give the holder a perpetual interest in the issuer's underlying common stock

All of the following statements are true regarding warrants EXCEPT:

warrant holders have pre-emptive rights, Warrants generally have a life of 2 months

All of the following securities represent ownership of a corporation EXCEPT:

warrants

DEF Corporation wants to raise additional capital without using an underwriter by issuing rights to its existing shareholders. The company needs to raise $100,000,000 to build a new manufacturing plant. Its common stock is currently trading at $54 and the subscription price for a rights holder is set at $50. The company has 4,000,000 shares outstanding. Which statement is TRUE for the owner of 100,000 XYZ common shares?

100,000 rights are received allowing the holder to buy 50,000 shares

ABC Corporation has declared a rights offering to stockholders of record on Tuesday, June 22nd. Under the offer, shareholders need 20 rights to subscribe to 1 new share at a price of $60. Fractional shares can be rounded up to purchase 1 full share. A customer owning 240 shares wishes to subscribe. The market price of the stock is currently $73. The customer can buy:

12 shares for $720

At the beginning of the year, an investor buys 1,000 shares of XYZ stock, purchased at $33 per share. Subsequently, the stock rises to $40 by the end of the year and the stock pays a $4 dividend during the year. By the end of the following year, the stock has fallen to $25 and pays the same $4 dividend. What is the stock's dividend yield?

16%

A corporation is offering a new issue consisting of 100,000 units at $200 each. Each unit consists of 2 shares of preferred stock and a warrant to buy one additional common share. A full warrant allows the purchase of an additional common share at $5. If all the warrants are exercised, the corporation will have:

200,000 preferred shares and 100,000 common shares

PDQ Company $1 par common stock currently trading at $55. PDQ is currently paying a quarterly common dividend of $1.10 per share. The current yield of PDQ stock is:

8.0%

A foreign security held in foreign branches of U.S. bank is a(n):

ADR

All of the following statements are true about American Depositary Receipts EXCEPT:

ADR holders have voting and pre-emptive rights

Which of the following would be considered owners of a corporation?

Both Common and Preferred Shareholders

If a corporation wishes to sell additional shares, which of the following persons can subscribe using pre-emptive rights?

Common Stockholders

Which statement is TRUE regarding American Depositary Receipts?

Exchange listed ADRs are sponsored

Which of the following statements about warrants are TRUE? I At issuance, warrants are "out of the money" II Warrant valuation is influenced by the life of the instrument III Warrant valuation is directly influenced by the valuation of the company's common stock IV Warrant valuation reflects market expectations for future earnings of the company

I, II, III, IV

Which of the following sources could be consulted to find the symbol of an NYSE listed security? I Federal Register II NYSE web site III Standard and Poor's Stock Guide

II and III

The essential difference between a sponsored and an unsponsored ADR is:

Issuer sponsorship

All of the following pay dividends EXCEPT:

Rights