SIE UNIT 2 Stimulated quiz

A customer owns cumulative preferred stock (par value of $100) that pays an 8% dividend. The dividend has not been paid this year and was missed in the two previous years. If the company wants to pay a dividend to common shareholders, how much must the company pay this customer per share first?

$24 If the company is going to pay a common stock dividend, it must pay the preferred dividends first, including all dividends in arrears (missed). There are $16 due in back dividends for the two years missed, in addition to $8 this year, for a total of $24.

Sierra Verde Coffee Company has 122 million shares of common stock outstanding. The last four weeks of trading volume are as follows: 1.2 million shares; 1 million shares; 1.1 million shares; and 900,000 shares. What is the volume limitation for an affiliate selling shares of the company over the next 90 days?

1.22 million The volume limitations under Rule 144 are the greater of 1% of the outstanding shares of the company or the average weekly trading volume over the most recent four weeks. In this example 1% of 122 million is 1.22 million. That is higher than any of the trade volumes of the last four weeks, much less the average of 1.05 million

Which of the following regarding established customers of a broker-dealer and the purchase of penny stocks are true? -They are exempt from the suitability statement requirement. -They are not exempt from suitability statement requirement. -They are exempt from the disclosure rules. -They are not exempt from the disclosure rules

An established customer is one who has effected a non-penny securities transaction or made a deposit of funds or securities into the account at least one year before the proposed penny stock trade or has made three purchases of penny stocks on three separate days involving three separate issues. Established customers are exempt from the suitability statement required but are subject to the disclosure rules

Under penny stock rules, what is required for a broker-dealer to consider an investor an established customer?

At least three separate penny stock purchases

Possible benefits of owning common stock do not include which of the following?

Interest income Bonds pay interest. Stocks can share profits by paying dividends.

Penny stock rules apply to both solicited and unsolicited transactions. -specify that established customers of the firm need not sign a suitability statement. -mandate that an account holding penny stocks only need not be provided with a monthly statement. -require that prospects be given a copy of a risk disclosure document before their initial penny stock transaction.

Penny stock rules only apply to solicited transactions, and it is required that the penny stock disclosure document be provided before any transactions in those securities may take place. However, a signed suitability statement (different than the risk disclosure) is not required for established customers. Statements of account activity must be provided monthly when an account holds penny stocks

Which of the following is true regarding taxation of dividends paid by American depositary receipts?

The dividends may be subject to withholding by the foreign government. Dividends paid to a U.S. investor may be subject to a withholding tax by the home country of the underlying foreign stock issuer. In many cases, the amount of tax withheld by the foreign government is applied as a credit against the investor's U.S. tax liability. These withheld funds are paid out by the U.S. government to the investor, not the foreign government. These dividends are taxed as investment income.

An investor owning 400 shares of CDS stock receives notice that the stock will be split. When the split is complete, the customer owns 600 shares of stock. The split must have been

a forward, uneven split Because the split resulted in the investor owning more shares, it was a forward split. Because the ratio of shares owned before and after the split was 3-for-2 (600:400 in this case), the split was an uneven split.

SKRAM Corporation is appealing directly to the shareholders of IDNIC Corporation to acquire shares of IDNIC stock. This appeal is best described as

a hostile takeover with IDNIC the target company. A hostile takeover is accomplished when the buyer (SKRAM) goes directly to the target (IDNIC) company's shareholders bypassing the board of directors or management.

Restricted shares, those that are unregistered, meaning that they were not attained in a public offering, may be sold by a nonaffiliate

after holding them for six months and freely thereafter. Nonaffiliates holding unregistered shares must wait six months before divesting of those shares, but because they are nonaffiliates, they may sell freely (without volume restrictions) thereafter.

Common shareholders wanting to vote on issues at a shareholder meeting can do so in all of the following ways except

by telephone or text message. Common shareholders wanting to vote at a shareholder meeting can do so in person or in absentia, using a proxy delivered by mail or online. Voting by text or telephone would not be permitted.

Common shareholders have the right to

limited access to a company's books and records.

A party wishing to solicit proxy authority to vote a particular stockholder's shares must register with

the Securities and Exchange Commission (SEC) Any entity wishing to solicit proxies to vote a stockholder's shares must register with the SEC.

An investor interested in quarterly income should invest in

utility company stock. Utility stocks generally pay quarterly dividends, whereas corporate and Treasury bonds pay interest semiannually. STRIPS pay at maturity.