Series 65 Unit 1
The board of directors of DDC omitted dividends in 2016 on their $100 par 6% noncumulative preferred stock. In 2017, a $2 preferred dividend was paid. For DDC, 2018 was a good year, and the board wishes to pay a common dividend. How much must be paid per share on the preferred for 2018 in order to pay a common dividend? A) $6 B) $12 C) $8 D) $16
A
The residual right of common shareholders refers to their right to A) receive all announced dividends in accordance with the number of shares held. B) claim company assets in bankruptcy after wages, taxes, creditors, and preferred shareholders have been paid. C) examine the corporation's annual reports and other reports, and take legal action if irregularities are found. D) vote in elections for the board of directors and in other important business decisions, such as changes to the charter.
A
Which of the following statements regarding nonqualified stock options (NQSOs) is correct? A) The NQSO is taxable to the recipient at the time of exercise to the extent of the difference between the fair market value of the stock and the exercise price. B) The exercise of NQSOs does not create taxable income. C) Unlike incentive stock options, NQSOs are publicly traded. D) The NQSO is taxable to the recipient at the time of grant to the extent of the difference between the fair market value of the stock and the grant price.
A
KAPCO common stock is listed on the New York Stock Exchange, Inc. (NYSE). If an executive vice president of the company buys 400 shares of the company's stock on the NYSE, she A) may sell under Rule 144 only after a six-month holding period. B) may sell immediately subject to Rule 144 volume limitations. C) may sell immediately without restriction. D) may not sell until she leaves the company.
B
One characteristic found in equity securities issued by a corporation is A) cumulative dividends. B) preemptive rights. C) a history of keeping pace with inflation. D) limited liability.
D
One difference between common stock and preferred stock is that common stockholders A) receive dividends when declared by the board of directors. B) have a priority claim on earnings. C) own equity in the company. D) have voting rights.
D
Ownership in a corporation is evidenced by holding shares of the company's A) bonds with a first mortgage on the property. B) common stock only. C) warrants. D) common or preferred stock.
D
Preferred Stock
Stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common-stock dividends. These stock holders do not have the same voting rights as common stock holders. The price of a preferred stock changes due to interest rates and not to the success of the business.
Common Stock Features
- Increase in market price is capital appreciation. - Common stock provides investors with returns in excess of inflation. - Long-term to hedge inflation - Stocks pay dividends - Capital gains are not taxed until they are realized - Limited liability
Debt Security
Acquired by buying an issuer's bonds.
Security
An investment that represents either an ownership stake or a debt stake. An investor becomes part owner on a corporation by buying shares of a companies stock.
In a portfolio containing common stock, straight preferred stock, convertible preferred stock, and adjustable-rate preferred stock, changes in interest rates would be mostlikely to affect the market price of the A) adjustable-rate preferred stock. B) straight preferred stock. C) common stock. D) convertible preferred stock.
B
Investing in an emerging market mutual fund subjects the investor to all of the following risks except A) political instability. B) liquidity. C) currency fluctuations. D) market volatility.
B
An ADR is used to A) facilitate trading in foreign securities in U.S. markets by U.S. citizens living in the United States. B) facilitate trading in U.S. securities in foreign markets by U.S. citizens living abroad. C) finance foreign trade in which U.S. citizens are engaged. D) reduce currency risk when investing in foreign securities.
C
For a profitable and rapidly growing firm, holders of preference shares are least likely to benefit from the firm's growth if the preference shares are A) common. B) participating. C) cumulative. D) convertible.
C
When comparing restricted stock to nonrestricted stock, it is important to note that the restricted stock has a restriction placed upon its A) receipt of dividends. B) priority in liquidation. C) resale. D) voting rights.
C
A common stockholder's rights include all of the following except A) preemptive rights. B) the receipt of dividends if declared by the board of directors. C) electing the board of directors. D) the right to determine the par value of the stock.
D
The issuer of an ADR is A) a foreign branch of a foreign bank. B) the exchange on which the ADR is traded. C) a domestic branch of a foreign bank. D) a U.S. depositary bank.
D
Common Stock
Equity in a corporation. Companies issue stock to increase capital.
Board of Directors (BOD)
Individuals elected by stockholders to establish corporate management policies. A board of directors decides, among other issues, if and when dividends will be paid to stockholders.
Stock Dividends
Stock dividends are dividends that are paid to you in more shares of stocks. For example, if you had 100 shares of stock and you received 20% in stock dividends, the corporation would increase your number of shares to 120.
What are the two types of stock?
The two types of stock are common stock and preferred stock.
Limited Liability
This means as a shareholder, if the business goes bankrupt, they cannot seek you out for money and any personal assets are not liable.
What does a person receive when they buy common stock?
When someone buys common stock, they are entitles to a portion of the companies earnings and dividends.
