s7-1

Equity Real Estate Investment Trusts will usually invest in which of the following? [A]properties in oil and gas[B]income producing properties[C]residential mortgage loans[D]public municipal facilities

b

JulySun.Mon.Tues.Wed.Thur.Fri.Sat.12345678910111213141516171819202122232425262728293031 ABC Corp. has declared a cash dividend to owners of record July 17. The last date for the customer to buy the stock regular way and still receive the dividend is: [A]July 11[B]July 13[C]July 17[D]July 18

b

A customer wants to invest in preferred stock. His key objective is to maintain consistent current income from dividends. Which of the following types of preferred stock would be most suitable for this customer? [A]Cumulative preferred[B]Participating preferred[C]Callable preferred[D]Convertible preferred

a

An equity investor is primarily concerned with preservation of capital. Currently, interest rates have been rising and are forecasted to continue to rise. Which of the following stock recommendations is most appropriate for this investor? [A]Defensive stocks[B]Utility stocks[C]Cycllical stocks[D]Emerging growth stocks

a

Assuming all of the following products are available, which provides the customer with the BEST opportunity to invest in a foreign stock? [A]An American Depositary Receipt (ADR)[B]An international fund that includes the stock[C]A global fund that includes the stock[D]A domestic corporation that is within the same sector

a

Preferred stock has which of the following traits? [A]Preferred stockholders have a priority claim to the assets of a corporation over common shareholders in the event of dissolution of the company.[B]Dividends on preferred stock are typically paid on a monthly basis.[C]Preferred stock is issued in relation to the amount of corporate debt carried by the company.[D]Shareholders of preferred stock have the right to vote for the board of directors.

a

Which of the following is probably a growth stock? Co. ACo. BCo. CCo. DEarnings Per Share$1.50$2.00$3.50$4.00Dividends Per Share.30.801.623.00Dividend Payout Ratio20%40%46%75%Retained Earnings %80%60%54%25% [A]Company A[B]Company B[C]Company C[D]Company D

a

Which of the following statements about preferred stock is true? [A]Preferred stock is considered an equity security.[B]Preferred stocks have maturity dates that are fixed.[C]Generally, preferred shares come with voting privileges.[D]Most preferred stock has an equal claim to company assets as common stock in the event that a company becomes insolvent.

a

Which of the following would provide a corporate issuer the most inexpensive source of capital? [A]common stock[B]preferred stock[C]debentures[D]mortgage bonds

a

A corporate stockholder has a "residual claim". This refers to the stockholder's right to: [A]Any additional dividends paid by the corporation out of its paid-in surplus.[B]Corporate assets remaining at dissolution after the satisfaction of senior obligations.[C]The remainder of a rights offering not taken by the principal investors.[D]Any dividends the corporation has not paid in the past.

b

All of the following are correct regarding common stock EXCEPT: [A]Common shares may be held in street name by a broker-dealer.[B]Common shares may be called by the issuing corporation after a specified date.[C]Common shares may be used as collateral for a loan in a margin account.[D]Ownership of common shares may be transferred with proper assignment on the back of the stock certificate.

b

An emerging growth company is generally defined as a company: [A]With total annual gross revenue of more than $1 billion for its most recent fiscal year[B]With total annual gross revenue of less than $1 billion for its most recent fiscal year[C]With total annual gross profits of less than $1 billion for its most recent fiscal year[D]None of the above EXPLANATION The definition in choice B is the generally accepted definition of an emerging growth company. It is usually a young company in a fast growing industry. These kinds of companies are usually characterized by high risk, high return, and high failure rates.

b

Cash dividends paid to investors: [A]are exempt from tax liability[B]are subject to Federal, State, and Local tax[C]reduce the cost basis of the common stock[D]increase the cost basis of the common stock

b

Treasury stock has which of the following features? Treasury stock refers to stock that the issuing corporation has repurchased. Treasury stock has not been issued to the public. Treasury stock is traded on margin by the issuing corporation. Treasury stock does not receive dividend payments and does not participate in voting matters. [A]I and III[B]I and IV[C]II and III[D]III and IV

b

Which of the following statement concerning Real Estate Investment Trusts are correct? They are considered investment companies under Federal Securities Laws They redeem securities at net asset value They must be registered with the SEC before a public sale They are not considered tax shelter investments because operating losses do not pass through to the owners of the REIT [A]I and II[B]III and IV[C]I, III, and IV[D]I, II, III, and IV

b

An investor buys 100 shares of ABC common stock at $85.50 per share. The stock pays a quarterly dividend of $1.00. If the common stock is currently trading at $95.50 per share, what is the current annual dividend yield? [A]1.08%[B]4.19%[C]4.51%[D]4.68%

b-EXPLANATION The current annual dividend yield is equal to the current annual dividend ($1.00 x 4 = $4.00) divided by the current market value of the stock ($95.50). Therefore, $4.00 / $95.50 = 4.19%.

A common stockholder in a corporate liquidation has: [A]A priority claim on the assets.[B]A claim on the assets prior to preferred stockholders.[C]A residual claim on the assets.[D]A claim on the assets prior to subordinate lenders but after secured creditors.

c

A customer reads in a news article that the consensus among economists regarding the economic outlook has turned negative. He calls his RR to ask how he should adjust his equity portfolio given this news. Which of the following recommendations would best address the customer's concern? [A]Sell cyclical stocks and buy growth stocks[B]Sell blue chip stocks and buy growth stocks[C]Sell cyclical stocks and buy counter-cyclical stocks[D]Sell defensive stocks and buy cyclical stocks

c

A single 25-year-old investment banker has income of $300,000 and net worth in excess of a million dollars. Her investment objective is capital appreciation. All of the following would be appropriate for this investor except: [A]equities in emerging markets[B]small cap equity securities[C]high yield preferred stocks[D]aggressive growth funds

c

All of the following are TRUE about the types or kinds of preferred stock EXCEPT: [A]Participating where shares may receive a dividend higher than the fixed dividend if the company's profits are larger than expected[B]Cumulative where shares accumulate dividends that were skipped in past years[C]Callable where shares may be redeemed by the company at a stated discount from par on certain dates[D]Convertible where shares may be exchanged for shares of common stock at the option of the shareholder

c

An RR has a customer whose primary objectives are investment income and capital appreciation. Which of the following investment options would best meet the customer's objectives? [A]A growth stock[B]A warrant[C]A REIT[D]A utility stock

c

Tony holds shares of Herkshire Bathaway, a company with headquarters in Omaha, Nebraska. He wanted to attend the annual shareholders meeting, but work and family life has gotten so busy that he may not even be capable of reviewing the items that are up for a vote, let alone attend the meeting. If Tony gives his broker-dealer a power of attorney that allows the firm to vote on his behalf, this authorization is called a [A]discretionary authorization.[B]margin agreement.[C]proxy.[D]letter of intent.

c

When a company does a Rights Offering, the rights are [A]sold to the general public.[B]sold to only existing shareholders.[C]only given to existing shareholders, proportionately to shares held.[D]given to the public on a first come, first serve basis.

c

When an investor in the U.S. owns an ADR (American Depositary Receipt), what does that mean? [A]It means that the investor owns U.S. bank-issued CDs (Certificates of Deposit).[B]It means that the investor has an equity position in an U.S. company, but that equity position is not tied to common stock.[C]It means that the investor holds a certificate representing ownership of a foreign company which is held by a custodian who is a third party to the ownership.[D]It means that the investor holds U.S. index fund shares.

c

Which of the following is NOT a characteristic of common stock? [A]Common stock represents an equity ownership of the company.[B]Common stocks are riskier than Treasury securities.[C]Dividends paid on common stock are typically a fixed percentage of the value at the time of issuance.[D]Bondholders and preferred stockholders have priority claims over common stockholders in the event of the company's liquidation.

c

Which would be a counter-cyclical industry? [A]The computer software industry[B]The pharmaceutical industry[C]The gold mining industry[D]The automobile industry

c

You are evaluating a number of preferred stocks with varying features. One of the preferred stocks that you are evaluating shows a pattern of increased market value in relation to increases in the market value of the common stock of the company. Of the following preferred stock features, which is the MOST LIKELY cause of this pattern? [A]The preferred stock likely carries a participating feature.[B]The preferred stock likely carries a cumulative feature.[C]The preferred stock likely carries a conversion feature.[D]The preferred stock likely carries a call feature.

c

ABC Corporation will be performing a preemptive rights offering. Which of the following is TRUE? [A]The corporation is offering long-term options to buyers of bonds to buy stock at a price that is currently above the current market price.[B]The corporation is changing the rights that shareholders have in association with their shares.[C]The corporation is attempting to preempt a takeover bid from a competitor.[D]The corporation is selling additional shares and must provide existing shareholders with the ability to maintain their proportionate ownership.

d

All of the following are examples of a regular stock split EXCEPT: [A]3:2[B]5:4[C]8:7[D]2:3

d

All of the following are rights of common stockholders EXCEPT to [A]vote for members of the Board of Directors.[B]inspect the corporate books.[C]receive a pro rata share of dividends declared by the Board of Directors.[D]vote for the amount of stock dividends they will receive.

d

Public utility common stocks generally experience greater price volatility than the common stocks of industrial companies due to which of the following? [A]Changes in the S & P 100 Index value[B]Computation of the Consumer Price Index[C]Net tangible asset value[D]Fluctuations in interest rates

d

Which of the following are reasons for a corporation to repurchase its own stock? [A]To increase "Earnings Per Share"[B]To fund stock option plans[C]To finance future acquisitions[D]All of the above

d

Which of the following are true concerning a Real Estate Investment Trust (REIT)? It must pay out a specified percentage of its earnings. It can only be purchased by persons in the 28% tax bracket. It cannot make short-term real estate construction and development loans. It makes money on the difference between its interest expenses and the interest it receives. [A]I and II[B]III and IV[C]II and III[D]I and IV

d

Which of the following features of preferred stocks could cause dilution? [A]A call feature[B]A participation/participating feature[C]A cumulative feature[D]A conversion feature

d

Which of the following is NOT a benefit of owning preferred stock rather than common stock? [A]Preferred could be convertible, allowing the investor a choice of conversion.[B]Preferred shares receive earnings prior to common shares.[C]Preferred shareholders have prior claims to the assets of the corporation if liquidation occurs.[D]Preferred shareholders have preemptive rights ahead of common shareholders.

d

Which of the following is most likely to fluctuate in value during a period of stable interest rates? [A]Cumulative preferred stock.[B]Participating preferred.[C]Senior preferred.[D]Convertible preferred.

d

Which of the following is probably a public utility? Co. ACo. BCo. CCo. DEarnings Per Share$1.50$2.00$3.50$4.00Dividends Per Share.30.801.623.00Dividend Payout Ratio20%40%46%75%Retained Earnings %80%60%54%25% [A]Company A[B]Company B[C]Company C[D]Company D

d

Which of the following is true of cumulative voting? [A]It is advantageous to majority shareholders.[B]Minority shareholders have a better chance of electing a director of their choice.[C]Majority shareholders can always elect the entire board of directors.[D]A stockholder of 400 shares with 5 persons to be elected to the board could only vote 400 shares for each director of his choice.

d

Which of the following statements regarding warrants is not true? [A]They allow the owner to purchase additional shares of common stock.[B]They can be used to increase the attractiveness of a new issue.[C]They are generally long-term.[D]They are an obligation which must be issued by the corporation.

d

A customer bought 100 shares of ABC at $20 per share. Some time later ABC declares a 5% stock dividend. Which of the following is true? [A]The customer will own 100 shares with a cost basis of $20 and 5 shares with a cost basis of $0.[B]The customer would receive a $5 dividend.[C]The customer would own 105 shares with a cost basis of $21.00 each.[D]The customer would own 105 shares with a cost basis of $19.05.

d-EXPLANATION The client would receive 5% of his holdings in additional stock. This would bring his total to 105 shares [ (100 shares x 5%) + 100 shares]. The client now owns 105 shares, for which he paid $2000, so his cost basis per share is $19.05 ($2,000/105 shares).