unit 1 answers to review

During times when interest rates are rising, which of the following preferred are likely to pay a higher annual dividend?

Adjustable rate

Bob owns 500 shares of the Paso Robles Olive Company (POLV). POLV has 5,000,000 shares outstanding and operates under a cumulative voting system. At the next election for the board, there are three open seats. All of these are true except

Bob has control of 1,500 votes, and he can cast up to 500 of those votes for each open seat.

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

Common shares

Which of the following features of preferred stock allows the holder to reduce the risk of inflation?

Convertible

Which of the following preferred issues is most likely to fluctuate in line with the issuer's common shares?

Convertible

Which of these would not require shareholder approval?

Declaring a dividend

Your customer prefers to invest in equity securities; however, she is hoping to increase the amount of current income from her portfolio. Which of these is the most suitable?

Generic Motors, Inc., 4¾% preferred stock

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

No holding period, but volume limits always apply

A corporation is issuing a bond with an interest rate below that which is commonly being offered for this type of bond. To improve the bond's marketability without reducing the capital to be obtained, which of the following actions might the corporation take?

Offer a warrant on the stock with each bond

An American depositary receipt (ADR) is

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

Straight preferred shares

are noncumulative. have no provision for paying missed dividends later.

An investor having no affiliation with CDS Company has just purchased shares that were sold subject to Rule 144. This investor

can sell the shares unrestricted at any time.

An example of a fixed-income security would include all of the following except

common stock that has historically paid dividends.

Preferred shareholders who expect missed dividend payments to be eventually paid are most likely to own

cumulative preferred stock.

he primary purpose of American depositary receipts (ADRs) is to facilitate the trading of

foreign stocks in U.S. markets.

First Mate Coffee Company has 400 million outstanding common shares. The company would like to raise capital by selling 100 million new shares. To do this, they must give their existing shareholders an opportunity to buy shares sufficient to maintain the shareholders' percentage of ownership. To accomplish this, they would

issue preemptive stock rights to existing shareholders.

The growth potential in the price of preferred shares is generally considered to be

less than that of the issuer's common shares.

At this year's annual shareholder meeting for Seabird Airlines, shareholders will vote to fill three open board seats. Seabird operates under a cumulative voting system. Your customer owns 200 participating preferred shares of Seabird Airlines. He has

no voting rights.

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

participating.

Callable preferred stock is advantageous to the issuing company because it allows the company to

replace a higher, fixed-rate issue with a lower issue after the call date.