Sie Equity Securities section 7
[ A ] 800 shares
A common stock split will not affect the investor's preferred stock holdings , so it remains at 800 shares .
[ D ] 4,000,000 shares are outstanding .
A corporation has authorized common stock of 10,000,000 shares . 8,000,000 shares have been issued and 4,000,000 shares are treasury stock . Which of the following is Correct true ?
[ c ] An investor that owns 200 shares could subscribe to 50 shares of the new [ A issue
ABC Corporation has 2,000,000 shares of common stock outstanding and decides to issue 500,000 new shares in order to raise capital . The Corporate Charter includes a Correct Preemptive Rights Clause . Assuming that ABC Corporation also has 10,000,000 Answer shares of common stock authorized and 1,000,000 treasury shares , which of the following statements is correct ?
[ c ] own 500 shares with a value of $ 12 per share .
An investor is long 100 shares of ABC common stock trading at $ 60 per share . ABC announces a 5 for 1 split . After the split , this investor would
[ A ] 800 shares
An investor owns 800 shares of ABC preferred stock paying a 5 % dividend . ABC company announces a 2 : 1 stock split on its common stock . How many shares of preferred stock will the investor own after the split ?
[ A ] Callable preferred stocks
Bonds are debt securities and do not represent ownership , so mortgage bonds and convertible bonds are incorrect . Equity options also do not represent ownership . However , preferred stock represents ownership ( equity ) in a company . This is true for all types of preferred stock , such as callable preferred stock .
[ A ] regular - way settlement .
Claire purchased 100 shares of ABC common stock on Monday , June 2nd , and pays for her purchase on Wednesday , June 4th . Assuming no other information , it can be assumed that this is a E EXPLANATION Regular - way Settlement is Trade Date plus Two Business Days or T + 2 . If Claire purchases on Monday . June 2nd , and she settles her purchase on Wednesday , June 4th , then this can be assumed to be a regular way settlement on the trade .
[ c ] own 500 shares with a value of $ 12 per share .
E When calculating a stock split you would multiply the ratio of the stock split ( 5/1 ) by the number of shares owned ( 100/1 ) to arrive at the new number of shares : 5/1 X 100 / 1500 / 1 = 500 shares after the split Next , you would take the former total value ( $ 60 / share x 100 shares = $ 6000 ) and divide this by the new number of shares ( 500 shares after the split ) to find the new market value : $ 6000 divided by 500 shares = $ 12 new market value per share after the split
[ B ] debentures , to secure a lower interest rate
EXPLANATION Although warrants can be used with any type of new issue , they are most often used with a new issue of debentures
[ D ] 4,000,000 shares are outstanding .
EXPLANATION Issued stock minus Treasury stock equals outstanding stock .
[ B ] redeem their rights for cash
In a pre - emptive rights offering existing shareholders can do all of the following except ? EXPLANATION A pre - emptive right allows an existing shareholder to purchase shares of the new issue of securities . If the existing shareholder decides that they do not want to purchase the new shares they can either sell the rights to another investor or let the rights expire worthless they CANNOT redeem the rights for cash .
[ B ] Preemptive Rights Clause [
Marke A preemptive rights clause allows existing existing shareholders from dilution . shareholders first choice on newly issued shares and protects the
[ B ] debentures , to secure a lower interest rate
Q A company would most likely include warrants in a new distribution of what type of issue ? Correct
[ A ] Common stock
Q A stock dividend would be paid on which of the following securities ?
[ B ] Preemptive Rights Clause
Q Which of the following best describes the requirement that a corporate charter requires the corporation to offer any new shares to the existing shareholders before offering the shares to the public
[ B ] limited partnership participation
Since there is no active secondary market on limited partnerships , they would offer the investors the least liquidity
[ c ] An investor that owns 200 shares could subscribe to 50 shares of the new issue .
We know we have a rights offering because it says , " the corporate charter included a preemptive rights clause . " If you take the 2,000,000 outstanding shares divided by the 500.000 new shares . you determine that this is a 4 : 1 Rights Offering . In answer C says we have 200 shares of stock . If you have 200 shares , this means you have 200 rights . So you take the number of shares owned or the number or rights and divide it by the ratio . 200 / 4 = 50. Therefore , if you have 200 shares of stock , you will be able to subscribe to 50 additional shares of the new issue .
[ B ] owe 10 additional shares of ABC common stock
When a customer is SHORT stock and a stock dividend is paid , the shares to the firm that they borrowed the stock from , therefore Mr.Smith would owe 10 additional shares of 0 investor would OWE the additional ABC common stock
[ B ] limited partnership participation
Which of the following investment choices would provide an investor the least liquidity
[ A ] They are required to be traded OTC .
Which of the following is FALSE concerning rights ? [ A ] They are required to be traded OTC . [ B ] They are freely transferable . [ c ] They normally have a short - term life span . [ D ] They may be listed on a stock exchange . EXPLANATION review Rights allow the holder to subscribe to stock at less than the current market price . Rights can be freely traded on the exchanges and usually have a maximum maturity of 90 days . Rights can be traded on an Exchange or OTC .
[ D ] Public utility
Which of the following is a defensive stock ?
[ A ] Callable preferred stocks
Which of the following securities represent ownership in a corporation ?
Cumulative and participating
Which of the following types of preferred stock may receive more than the stated dividend. An owner of cumulative preferred stock would receive all omitted past dividends before common stockholders can receive any dividends. A participating preferred stockholder would have the right to participate in any extra dividends paid to the common stockholders . Therefore , owners of either of these types of preferred stock may receive more money on a given dividend payment than that amount stated on its face .
Shares of stock can be paid on common stock . Preferred stock of a corporation may pay cash dividends at a 0 fixed dividend rate to the shareholders . Treasury bills and Treasury notes are forms of debt and would never pay dividends of any kind , cash or stock .
[ A ] Common stock
[ D ] Public utility
review Defensive stocks ( not defense ) are stocks that remain stable during good and bad times . A Debenture is a type of bond , and is not a stock .
