SIE Exam Part 1 - Questions Having Trouble With

When selling a bond, the issuer is taking what kind of position?

A Borrowers Position

While preferred shares tend to be less volatile than common shares, one type of preferred is noted as being even more stable in price than the others. This would be A) callable. B) convertible. C) participating. D) adjustable rate.

Adjustable Rate

While preferred shares tend to be less volatile than common shares, one type of preferred is noted as being even more stable in price than the others. This would be what?

Adjustable Rate

An investor would expect which type of preferred stock to pay the highest stated dividend rate?

Callable

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

Callable Preferred

MJS Corporation has called in its 6% preferred shares. Owners of these shares should expect that dividend payments will ________________ on the _______________ date.

Cease, Call

Feature of preferred stock allows the holder to reduce the risk of inflation

Convertible

Feature of preferred stock that allows the holder to reduce the risk of inflation

Convertible

Type of preferred issue that is most likely to fluctuate in line with the issuer's common shares?

Convertible

Your customer, MJ, has a strong preference for investing in equity securities; however, she is hoping to increase the amount of current income her portfolio generates. Which of these is the least suitable for her? A) BuyMore, Inc., a big-box retailer with a long history of healthy dividend payments B) Duratech common stock, an exciting new tech manufacturer C) Long Beach Electric, a utility D) Generic Motors, Inc., 4 ¾ % preferred stock

Duratech common stock, an exciting new tech manufacturer

All of these dates are declared by the board of directors of a corporation except the A) ex-dividend date. B) payable date. C) record date. D) declaration date.

Ex-Dividend Date

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?

Ex-Dividend Date

A convertible feature for preferred shares allows the owner to exchange the shares for a _______________ number of shares of the issuing corporation's __________________ stock.

Fixed, Common

Callable preferred stock is advantageous to the issuing company because it allows the company to replace a ________________, ___________ -______________ issue with a ____________________ issue after the _________ date

Higher, Fixed-Rate, Lower, Call

Straight preferred shares I.are noncumulative. II. are cumulative. III. allow for missed dividends to be paid later. IV. have no provision for paying missed dividends later. A) II and IV B) I and IV C) II and III D) I and III

I and IV

Priority at dissolution for preferred shareholders means that they are paid I. before all creditors. II. after all creditors. c. before common shareholders. d. after common shareholders. a.) II and III b.) I and IV c.) II and IV d.) I and III

II and III

Rules to protect the investing public during the public offering process include all of the following except A) member firms may not withhold securities in a public offering for their own benefit. B) limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees. C) members must offer the securities at the public offering price. D) securities industry insiders may not take advantage of their insider status to gain access to new issues for their own benefit.

Limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees

By electing a BOD, stockholders have a say in the company's _________________ but are not involved in the day-to-day details of its __________________

Management, Operations

Common stockholders owning dividend paying stocks are exposed to what kinds of risk?

Market & Current Income Risks

Do registered shares held by an affiliate (known as control stock) have a holding period? If so, how long?

No

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 _________________ value or _______________

Par, Higher

The right to purchase shares in an amount that would keep a shareholder's proportionate ownership in the corporation unchanged when a company issues additional shares.

Preemptive Rights for Existing Shareholders

Rule 144 stipulates that after holding restricted stock fully paid for six months, an affiliate may begin selling shares subject to ___________________ restrictions within any ___________ day period.

Volume, 90

Preferred shareholders have no _____________ or ______________________ rights.

Voting, Preemptive

Do volume limits apply to registered shares held by an affiliate (known as control stock)? If so, when?

Yes, Always

In 2011, RST Corp. had both common stock and $100 par value 4% noncumulative preferred stock, outstanding. The preferred stock, like the common stock, pays dividends on a quarterly basis. Because of financial difficulties, the company stopped paying dividends after 2011. After resolving its problems in 2015, the company resumed dividend payments in 2016. Before paying the first quarterly common stock dividend that year, the company would have to pay a quarterly dividend to the preferred stockholders of A) $4.00. B) $1.00. C) $20.00. D) $17.00.

$1.00

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 a preferred shareholder received a $3.50 annual dividend each year, it could be assumed that this is a ___________% _________________ class

3.5%, Preferred

When purchasing a bond, the investor is taking on what kind of position?

A Creditor Position

Transactions where the penny stock rules are applicable would be those that A) are either solicited or unsolicited. B) are unsolicited. C) are neither solicited nor unsolicited transactions. D) are solicited.

Are solicited

An investor would expect which type of preferred stock to pay the highest stated dividend rate? A) Straight B) Convertible C) Callable D) Cumulative

Callable

Preferred stock that allows the issuer to pay the shareholders par and cease dividend payments following a stated period

Callable

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

Callable Preferred

An investor having no affiliation with CDS Company has just purchased shares that were sold subject to Rule 144. This investor A) can sell the shares unrestricted at any time. B) can only sell subject to volume limits. C) must wait six months before any sales can be made. D) must wait six months before selling shares subject to volume limi

Can sell the shares unrestricted at any time

Voting rights are a privilege generally afforded to A) preferred shareholders only. B) neither common nor preferred shareholders. C) common shareholders only. D) both common and preferred shareholders.

Common Shareholders Only

During the dissolution of corporate assets, common shareholders will be paid if there are any funds left after debtholders and preferred shareholders are paid refers to what?

Common Shareholders Residual Right

Which of the following statements is correct concerning currency risk when investing in an American depository receipt (ADR)? A) Currency risk is still a factor when purchasing an ADR. B) U.S. investors are protected from currency risk by the depositary bank. C) U.S. investors are protected from currency risk by the underlying foreign corporation. D) Currency risk is eliminated because the securities are dollar denominated.

Currency risk is still a factor when purchasing an ADR

An american depository receipt is a A) domestic security trading in foreign markets. B) domestic security representing a foreign security in U.S. markets. C) foreign security trading in U.S. markets. D) foreign security representing a domestic security in foreign markets.

Domestic security representing a foreign security in U.S. Markets

Rule 144 imposes volume limitations on the number of shares that can be sold by I. control persons selling registered stock held for one year. II. control persons selling restricted stock held for two years. III. nonaffiliates selling registered stock held for one month. IV. nonaffiliates selling restricted stock held for more than six months. a.) II & III b.) I & IV c.) I & II d.) III & IV

I & II

Rule 144 imposes volume limitations on the number of shares that can be sold by I. control persons selling registered stock held for one year. II. control persons selling restricted stock held for two years. III. nonaffiliates selling registered stock held for one month. IV. nonaffiliates selling restricted stock held for more than six months a.) II & III b.) I & IV c.) I & II d.) III & IV

I & II

An investor and his mother own 20% and 10%, respectively, of a corporation's outstanding shares, and the mother wants to sell all of her holdings. According to Rule 144, which of the following statements are true? I. She must file Form 144 to sell the shares. II. She does not have to file Form 144 to sell the shares. III. She is considered an affiliated person. IV. She is not considered an affiliated person. a.) I & IV b.) II & IV c.) II & III d.) I & III

I & III

Jon owns 100 shares of the Bayside Fishing Company. Bayside has 1,000,000 shares outstanding and operates under a statutory voting system. At the next election for the board, there are two open seats. All of these are true except a.) Jon has control of 200 votes, and he can cast up to 100 of those votes for each open seat. b.) Jon owns 1/10000 of the Bayside Fishing Company. c.) Jon has a right to freely transfer his shares. d.) Jon has control of 200 votes, which he can cast any way he likes among the two open seats.

Jon has control of 200 votes, which he can cast any way he likes among the two seats

Rules to protect the investing public during the public offering process include all of the following except a.) member firms may not withhold securities in a public offering for their own benefit. b.) securities industry insiders may not take advantage of their insider status to gain access to new issues for their own benefit. c.) members must offer the securities at the public offering price. d.) limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees.

Limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing company's employees

For registered shares held by an affiliate (known as control stock), which of the following applies? a.) No holding period or any volume restrictions b.) Six-month holding period, with sales allowed freely thereafter c.) Six-month holding period, with volume limits thereafter d.) No holding period, but volume limits always apply

No holding period, but volume limits always apply

For registered shares held by an affiliate (known as control stock), which of the following applies? a.) Six-month holding period, with volume limits thereafter b.) No holding period, but volume limits always apply c.) No holding period or any volume restrictions d.) Six-month holding period, with sales allowed freely thereafter

No holding period, but volume limits always apply

In the event that a Corporation issued callable shares and eventually calls them in, stockholders should expect that the shares be called in at what?

Par Value or Higher

A shareholder owns preferred shares that allow for the possibility of receiving more than the stated dividend. This type of preferred share is known as what?

Participating

A shareholder owns preferred shares that allow for the possibility of receiving more than the stated dividend. This type of preferred share would be known as what?

Participating

For restricted stock (unregistered) held by a nonaffiliated they are subject to a ____________ ______________ holding period with sales allowed how thereafter?

Six Month, Freely

For restricted stock (unregistered) held by an affiliate (insider), which of the following applies? A) No holding period, but volume limits always apply B) No holding period or any volume restrictions C) Six-month holding period, with volume limits thereafter D) Six-month holding period, with sales allowed freely thereafter

Six month holding period, with volume limits thereafter

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 ______________ months and how thereafter?

Six, Freely

Rule 144 stipulates that after holding restricted stock fully paid for ___________ months, an affiliate may begin selling shares subject to ______________ restrictions within any ________-day period.

Six, Volume, 90

For restricted stock (unregistered) held by a nonaffiliated, which of the following applies? a.) No holding period or any volume restrictions b.) No holding period, but volume limits always apply c.) Six-month holding period, with sales allowed freely thereafter d.) Six-month holding period, with volume limits thereafter

Six-month holding period, with sales allowed freely thereafter

Transactions where the penny stock rules are applicable would be those that are ____________________

Solicited

Shares that are noncumulative and have no provision for paying missed dividends later

Straight Preferred

Types of shares that are non-cumulative and have no provision for paying missed dividends later

Straight Preferred Shares

MMS Corporation has 7% callable preferred shares outstanding. Over the past few years, benchmark interest rates have declined and hovered close to 3%. Which of the following is true? a.) More 7% callable shares should be issued b.) The issuer is likely to reduce the dividend to 3% c.) The issuer will covert these shares to common stock. d.) The 7% shares are likely to be called.

The 7% shares are likely to be called

MMS Corporation has 7% callable preferred shares outstanding. Over the past few years, benchmark interest rates have declined and hovered close to 3%. Which of the following is true? a.) The issuer will convert these shares to common stock b.) More 7% callable shares should be issued c.) The 7% shares are likely to be called d.) The issuer is likely to reduce the fixed dividend to 3%

The 7% shares are likely to be called

When shareholders owning participating preferred shares receive the additional participating amount, this was determined by A) the board of directors (BOD). B) Securities and Exchange Commission (SEC) mandate. C) common shareholders. D) the vote of all other preferred class shareholders.

The Board of Directors (BOD)