Reviewing Equities Quiz

The market price of common stock will be influenced by which of the following?

Expectations for future earnings growth

As interest rates rise, preferred stock prices will:

Fall

The definition of Treasury Stock is:

issued stock minus outstanding stock

Common dividends can be paid in all of the following forms EXCEPT:

warrants

XYZ Company has issued 10%, $100 par non-cumulative preferred stock. Two years ago, XYZ omitted its preferred dividend. Last year, it paid a preferred dividend of $5 per share. This year, XYZ wishes to pay a common dividend. In order to make the distribution to common shareholders, each preferred share must be paid a dividend of:

$10 10% * 100

DUPA Corp. has a Price/Earnings multiple of 20 and a market price of $45. What was the corporation's Earnings Per Common Share?

$2.25 -45/20

A customer buys 100 shares of preferred at $101 per share. The par value is $100. The dividend rate is 8%. Each dividend payment will be:

$400 8% * 100 = $8 * 100 = $800/2 = $400

A corporation has issued 100,000,000 shares of common stock at $1 par. The corporation has 25,000,000 shares of Treasury Stock on its books. The aggregate value of the outstanding shares is:

$75,000,000

All of the following statements about warrants are true EXCEPT?

-At issuance warrants have intrinsic value -Warrants typically give the holder a perpetual interest in the issuer's underlying common stock

An ADR has been issued where each ADR equals 600 ordinary shares of the foreign issuer. If a client wished to buy enough ADRs to cover 6,000 ordinary shares, how many ADRs must be purchased?

10

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 $720 240/20 = 12 * 60 = 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% -$4/$25

ABC Company has issued 10% cumulative preferred stock. Two years ago, ABC paid a 6% preferred dividend. Last year, ABC paid a 7% preferred dividend. This year, ABC wishes to pay a common dividend. The preferred shareholders must receive:

17%

ABC 8% $100 par preferred is trading at $120 in the market. The current yield is:

6.7%

ABC 8% $100 par preferred is trading at $105 in the market. The current yield is:

7.6% $8(8%*100) / $105

ABC Company has outstanding 6% cumulative preferred stock. Two years ago, ABC paid a 6% preferred dividend. Last year, ABC paid a 4% preferred stock dividend. This year, ABC wishes to pay a common dividend. The preferred shareholders must receive:

8% -On cumulative preferred stock, all back unpaid dividends PLUS this year's preferred dividend must be paid before a common dividend is paid. Thus, 2 years ago the full 6% preferred dividend was paid, so there is no arrearage; last year only 4% was paid, so 2% was missed. Before a common dividend can be paid this year, the missing 2% plus this year's 6% preferred dividend, or a total of 8% must be paid.

PDQ Company $1 par common stock currently trading at $34. PDQ is currently paying a quarterly common dividend of $.75 per share. The current yield of PDQ stock is:

8.8% -$3(.75*4) / $34

In a corporate liquidation, common stockholders are paid:

After bondholders and preferred stockholders

When the market price of ACME Common stock is at $45, which of the following actions, when completed by ACME Corporation, would raise additional capital?

Announcement of a rights distribution, allowing existing shareholders to buy the stock at $35 per share

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

ADR

All of the following statements are true about ADRs EXCEPT:

ADR holders can vote for the board of directors

Dividends are paid to holders of:

ADRs

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

ADRs are traded on the Chicago Board Options Exchange

Which statement is TRUE about ADRs?

Holders are entitled to dividends if declared

An investor who wishes to vote at a company's annual meeting:

Can vote by proxy

Dividends on preferred stock may be paid in:

Cash

Which of the following do NOT have an equity position?

Convertible debenture bondholders

What type of preferred stock can move in price as the price of the common stock moves?

Convertible preferred

Which statement is TRUE when comparing convertible preferred stock and non-convertible preferred stock?

Convertible preferred stockholders benefit as the market price of the common stock rises

All of the following actions by a corporation will affect an individual common shareholder's equity EXCEPT:

Declaration of a stock dividend or stock split

An individual would examine a company's Price to Earnings Ratio in order to:

Determine if the stock is faily valued

Which statement is FALSE about preferred stock?

Dividends are paid quarterly

Corporate dividend payments may be made in all of the following forms EXCEPT:

Listed options of that company

Preferred stock market valuation is based primarily upon:

Long term market interest rate levels

When comparing the statutory voting method to the cumulative voting method, which statement is TRUE?

Minority shareholders have greater voting effectiveness with cumulative voting

Which statement is TRUE regarding a corporation that has adopted cumulative voting?

Minority stockholders have a greater ability to elect the director of their choice

Which statement is TRUE about shareholder rights?

Only common shareholders have preemptive rights

What term would apply to Authorized Stock?

Par Value

What term would apply to Treasury Stock?

Par value

During periods of stable interest rates, which type of preferred stock will have the greatest price volatility?

Participating

A middle-aged widowed customer has an investment objective of stable income and would also like to receive occasional "extra" income to help pay unexpected bills. What type of preferred stock would be the best recommendation?

Participating preferred

Which statement is TRUE regarding preferred stock payments?

Preferred dividends are usually higher than those paid to common

If interest rates fall, issuers most likely will call:

Preferred issues trading at a premium or preferred issues with above market interest rate

Common dividends are paid:

Quarterly On outstanding shares

Common dividends are usually declared:

Quarterly by the board of directors of the company

All of the following terms describe rights EXCEPT:

Redeemable

All of the following are types of preferred stock except:

Refundable

All of the following are terms associated with preferred stock EXCEPT:

Renewable

Stockholder approval is needed if a corporation wishes to do all of the following EXCEPT:

Repurchase shares for treasury

Common stockholders have all of the following "rights" EXCEPT:

Right to vote for the annual dividend rate

Of the following choices, the only method that will raise new funds for a corporation is to:

Sell additional common shares through a rights offering

Which statement is TRUE regarding rights?

The exercise price of a right is set at a discount to the stock's current market price

Which statement is TRUE regarding warrants?

The exercise price of a warrant is set at a premium to the stock's current market price

American Depositary Receipts would trade on all of the following exchanges EXCEPT the:

The london stock exchange

A customer gives a power of attorney to a caretaker to vote his shares on his behalf at the company's annual meeting. Which statement is TRUE?

This is known as a proxy

American Depositary Receipts pay dividends in:

U.S. dollars

The Price / Earnings Ratio is a measure of:

Valuation

All of the following statements are true regarding warrants EXCEPT:

Warrant holders have pre-emptive rights

All of the following statements about warrants are true EXCEPT:

Warrant valuation rises as the security approaches its maturity

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

Warrants

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

Warrants have intrinsic value at issuance

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

Voting of the common stockholder is required for all of the following EXCEPT:

When a corporation declares a stock dividend