SIE: Unit 1

When a company with CS stock at $100 pv and 4% noncumulative preferred stock stops paying dividends one year then resumes 3 years later, the company would have to pay a quarterly dividend to the preferred stockholders of

$1

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

$5 per share

Which of the following securities would likely provide the greatest potential for capital appreciation?

A common stock

Which of the following statements is correct concerning the pricing of American depository receipts (ADRs)?

ADR pricing is dollar-based and fluctuates throughout the day

when interest rates are rising, what preferred is likely to pay a higher annual dividend?

Adjustable rate

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

American depositary receipts (ADRs)

By purchasing shares of stock in company, investors can benefit from which of the following?

An increase in the price of shares and the receipt of profits to be distrubuted

Which of the following preferred stocks allows the issuer to pay the shareholders par and cease dividend payments following a stated period?

Callable

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

Convertible

Your customer 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?

Duratech common stock, an exciting new tech manufacturer

A common stock shareholder's residual right to corporate assets refers to which of the following?

During the dissolution of corporate assets, common shareholders will be paid if there are any funds left after debt holders and preferred shareholders are paid

Jon owns 100 shares of company a. company a 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 the following are true except

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

Can an individual owning shares of a corporation's common stock declare dividends?

No

Example of an equity security?

Preferred shares

Are rights or warrants short or long term?

Rights are short term; warrants are long term

Mr. Smith bought an ADR in a French company at $13.03 and recently sold the shares for $24.88. How would this trading profit be taxed?

The profit is taxed as capital gaing in the U.S. only

How are American depository receipts (ADRS) executed?

Trades are executed domestically in U.S. dollars

All of the following are considered securities except

U.S. minted gold coins

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

adjustable rate

Which of these would require shareholder approval?

changing the corporation's name

Under rule 144, which of these sales are subject to volume limitations on the number of shares sold?

control person selling registered stock held for 1 year and control person selling restricted stock for 2 years

Rule 144 imposes volume limitation on the number of shares that can be sold by

control persons selling registered stock held for one year and control persons selling registered stock held for two years

Which of the following statements is correct concerning currency risk when investing in an ADR?

currency risk is still a factor when purchasing an ADR

An ADR is a

domestic security representing a foreign security is U.S. markets

Another term for stocks and bonds is

equity and debt

All of these dates are declared by the BOD except the

ex-dividend date

Mary owns 8% of company a, a publically traded company. She has recently married John, a doctor who owns 3% of company a. John wants to sell some of his shares to pay off the debt from the wedding. when he does, he will need to

file form 144 because he is a control person

For preferred shares, the annual dividend payment is

fixed and stated as a percentage of its par value

All of the following are possible actions of an investor who has received stock rights except

hold the rights for a possible long-term capital gain

Is low dissolution priority a benefit of owning common stock?

no

For this election cycle, company a has three open board seats. The company operates under a cumulative voting system. Your customer owns 300 participating preferred shares of the company. He has

no voting rights

Straight preferred shares are

noncumulative and have no provision for paying missed dividends late

American liquidators Corporation has 100 million shares. The company would like to raise capital by selling 100 million new shares. In order to do this they must give their existing shareholders an opportunity to buy shares sufficient to maintain the shareholders percentage of ownership. In order to accomplish this, they would

offer stock rights to existing shareholders

Preferred shares that allow for the possibility of receiving more than the stated dividend Is

participating

Included under the term equity security would be

participating preferred

A corporation that has issued cumulative preferred stock

pays past and current preferred dividend before paying dividends on common stock

All of the following statements regarding penny stocks are true except

penny stock rules apply to both solicited and unsolicited transactions

The holders of which of the following securities are considered owners of the issuing corporation?

preferred stock and common stock

Equity is to debt as

stock is to bond

Big Company Inc listed manufacturer of large objects, has declared a 50-cent-per-share-dividend payable next month. Big company also has options available for trade. The actual ex-dividend date will be declared by

the NYSE

The market price of a company's common stock could be affected by

the company's earnings, changes in the business cycle, the federal reserve board (FRB) policies, and international conflicts

What is the primary purpose of an issuer sponsoring and ADR

these securities are created to attract a U.S. investor base

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 and they are not exempt from the disclosure rules

ADRS of automobiles in Asia differ because

they do not have the same voting rights as an owner of the common stock

An individual owning shares of a corporation's common stock would have all of the following rights except

to declare dividends

Exempt from the penny stock rules are

unsolicited transactions

How can shareholders vote?

vote by proxy

company a is issuing 100 million dollars in 4.5% bonds maturing in 20 years. When purchased at issue, the buyers will receive an additional security that allows them to purchase 20 shares of company a common stock at $50 a share, anytime in the next 10 years. Company a is currently trading at $29.95 a share. This is an example of a

warrant