Series 7 Unit 2

An investor in the 28% tax bracket has a $5,000 loss after netting all capital gains and losses realized. How much may the investor deduct from income that year?

$3,000

Which of the following describe a securities exchange? 1. Prices are set by negotiation between interested parties. 2. The highest bid and the lowest offer prevail. 3. Only listed securities can be traded. 4. Minimum prices are established at the beginning of the day.

2. The highest bid and the lowest offer prevail. 3. Only listed securities can be traded.

Which of the following is not a right conferred upon ownership of common stock?

Limited liability

For tax-reporting purposes, qualified dividends are considered to be what type of income?

Portfolio

Which of the following equity securities has the longest expiration date?

Warrants

For several months, there has been no activity in a client's account. A monthly statement would be required if the account contained

penny stocks.

If a client asked you about an equity security with a cumulative feature, the question would most likely be dealing with

preferred stock.

As interest rates fall, prices of straight preferred stock will

rise.

Stocks that are listed on the NYSE can also trade on all of the following except

the CBOE (Chicago Board Options Exchange).

Common risk factors found when investing in penny stocks would include all of the following except

unfavorable tax treatment.

A corporation is having a rights offering. The terms of the offering require six rights plus $60 to purchase one share. With the stock's current market price at $74 per share, the theoretical value of one right before the ex-rights date is

$2.00. Because the question is asking about the value before ex-rights, it means we use the cum-rights (with rights) formula; that is, the market price minus the subscription price divided by the number of rights it takes to buy one share plus one. Plugging in the numbers gives us ($74 - $60) ÷ (6 + 1) = $14 ÷ 7 = $2.00.

Which of the following statements regarding preferred stock is not true?

Voting rights of preferred shareholders take precedence over those of common shareholders.

A type of alternative trading system that trades listed stocks and is required to register with the SEC as a broker-dealer is

an ECN.