unit 1

American depositary receipts (ADRs)

A Japanese computer chip manufacturer wants to attract U.S equity investors. Which of the following securities would help the issuer to accomplish this goal?

a warrant.

A certificate issued by a company granting its owner the right to purchase securities from the issuer at some specified price years into the future would best be described as

25 shares

A corporation with 1 million shares of stock outstanding wishes to sell another 250,000 shares. When management conducts a rights offering, a shareholder owning 100 shares will be given stock rights to purchase how many additional shares?

A disclosure statement is required, but not a suitability statement.

A customer has held an account with a broker-dealer for over one year. A registered representative associated with the firm recommends the purchase of an unlisted security trading at $3.50. What documentation, if any, is required prior to the trade?

$24

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?

Callable preferred

All else being equal, which of the following preferred would pay the highest dividend?

low dissolution priority.

All of the following could be characterized as benefits to owning common stock except

any shares sold will be subject to volume restrictions if still an affiliate.

An affiliate has held restricted shares fully paid for six months. In anticipation of the desire to divest the shares, the affiliate should know that

utility company stock.

An investor interested in quarterly income should invest in

The investor is an established customer.

An investor looking to speculate in penny stocks would be exempt from the suitability statement requirement under which of the following circumstances?

Rights will be distributed to existing stockholders with an exercise price lower than the current market value.

An investor needs to decide whether or not they would like to maintain their percentage of ownership in a company that has decided to increase the number of outstanding shares. Which of the following is the best description of what is taking place?

could receive an additional 2% over the stated 4% dividend if the board declares it.

An investor owns 4% preferred stock participating to 6%. This means the investor

immediately, subject to Rule 144 volume limitations.

An officer of a public company buys 1,000 shares of the company's registered stock in the open market. Regarding the sale of these shares, the officer may sell

par value or higher.

CDT Corporation has issued 4.5% callable preferred shares. If these shares are ever called in, stockholders should expect that the shares would be called in at

Market price less than $5 per share and unlisted

Characteristics common to penny stocks would include which of the following?

each quarter.

Common shareholders have the right to receive an audited set of financial statements of the company's performance

market risk but not current income risk.

Common stockholders owning dividend paying stocks are exposed to

No holding period, but volume limits always apply

For registered shares held by an affiliate (known as control stock), which of the following applies?

ex-dividend

In the dividend disbursement process three of the four critical dates are determined by the board of directors (BOD) but one is determined by either Financial Industry Regulatory Authority (FINRA) for OTC stocks or the exchange for listed stocks. Which one is it?

carry no guarantee of payment in any amount.

Once a dividend is initially declared by the board of directors (BODs), any future dividend payments

restricted

Securities acquired through some means other than a registered public offering are known as

$5 per share.

Under the rules, a penny stock is defined as an unlisted, security trading at less than

maintain their proportionate ownership in the corporation.

When a company wants to issue additional shares of stock, the preemptive right given to existing shareholders allows those shareholders to

the board of directors (BOD).

When shareholders owning participating preferred shares receive the additional participating amount, this was determined by

Common shares

Which of the following securities is the underlying asset used to create an American depositary receipt (ADR)?

Stock acquired in the OTC market by a corporate affiliate

Which of the following sell transactions is not subject to the holding period restriction specified in SEC Rule 144?

Currency risk is still a factor when purchasing an ADR.

Which of the following statements is correct concerning currency risk when investing in an American depositary receipt (ADR)?