Series 65- Unit 1- MC Quiz
A. no effective change in the value of the position
A client has 100 shares of GHI when the stock undergoes a split. After the split, the client has
incentive stock options (ISOs)
An employee wishing to obtain long-term capital gain treatment would prefer the employer to offer
B. ownership must be established by the record date.
One of the rights of those owning common stock is the opportunity to vote on issues brought up at the corporation's annual meeting. To be eligible to cast a vote,
A) the bargain element of the ISO is an AMT preference item.
One way in which incentive stock options (ISOs) differ from nonqualified stock options (NQSOs) is that
B. the bargain element of the ISO is an AMT preference item.
One way in which incentive stock options (ISOs) differ from nonqualified stock options (NQSOs) is that
C. giving those shareholders an opportunity to participate in the future success of the company.
Reasons why a corporation might issue a convertible preferred stock would include
A and B. Control persons are always subject to volume limitations.
Under Rule 144, which of the following sales are subject to volume limitations? A. Control person selling registered stock held for one year B. Control person selling restricted stock held for two year C. Nonaffiliate selling registered stock held for one year D. Nonaffiliate selling restricted stock held for two year
Common Stock
Which of the following has the least exposure to inflation risk?
C. Stock acquired on the NYSE by a corporate affiliate (The holding period rule applies only to unregistered stock)
Which of the following sell transactions is not subject to the holding period restriction specified in SEC Rule 144?
C) a certificate representing ownership of a U.S. security that is deposited in a foreign bank.
An American depositary receipt (ADR) is
C. is taxed on $10 per share as if it were salary.
An employee is offered a nonqualified stock option with an exercise price of $20 per share. If the option is exercised when the current market value of the stock is $30, the employee...
C. Corporations are contractually obligated to pay dividends to their shareholders each year.
Which of the following statements about dividends on common stock is not true?
A) Preferred stockholders do not have the right to subscribe to a rights offering.
Which of the following statements regarding preemptive rights is true?
American depositary receipt (ADR)
An investor may expect to receive dividends from
A. at the time of the grant, the recipient of the grant of the ISO has no income tax consequences while the recipient of the NSO treats the bargain element as compensation.
Corporations have found that one way to increase employee motivation is to grant options to purchase stock in the company. Incentive (qualified) options differ from nonqualified options in all of the following respects except
A and B
An investor wishing to add some diversification to his portfolio wants to purchase 200 shares of an ADR for a Japanese electronics manufacturer. The ADR is listed on the NYSE. Which of the following risks should be of most concern to this investor? A. Business B. Currency C. Inflation D. Liquidity
C. The spouse is an affiliate and Rule 144 applies. (Together, the client and spouse own 13% of the company's stock, so the spouse is considered an affiliate and is bound by Rule 144. If there is a 10% or more ownership interest among members of an immediate family living at the same residence, then all members are considered control persons (affiliates) subject to Rule 144. For exam purposes, assume that spouses share the same residence).
If a customer owns 7% of a publicly traded company's stock and his spouse owns 6% and wants to sell her shares, which of the following statements is true?
A, B, & D
An investor who chooses to use preferred stock as an income source instead of bonds would potentially incur which of the following risks? A. Loss of principal can occur. B. Price volatility of preferred stock is closely related to interest rates. C. Preferred stock cannot be traded as readily as bonds. D. If the stock is callable, the client's income can be suddenly lowered.
C) They are not subject to exchange rate, or currency, risk.
A client is considering the purchase of American depositary receipts (ADRs). The client is looking to further diversify her portfolio. Which of the following is not a feature of this type of investment vehicle?
incentive stock options (ISOs)
Assuming the time limit conditions are met, exercise of an _________________________________________can result in long-term capital gains while nonqualified options are always treated as ordinary income.
