Series 65 Study guide
Which of the following statements regarding a 100% stock dividend are true? I. The share price is reduced by half II. The total market value of the outstanding stock decreases III. the total market value of the outstanding stock may increase or decrease as a result of the split IV. The number of shares doubles A ) II and IV B) I and IV. C) I and III. D) II or III
Answer B) I and IV
If a customer owns 7% of a publicly-traded company's stock and his spouse owns 6% and wants to sell her shares, which of the following statements is true? A) The spouse is not an affiliate and Rule 144 applies B) the spouse is an affiliate and Rule 144 applies. C) The spouse is an affiliate and Rules 144 doses not apply D) The spouse is not an affiliate and Rule 144 does not apply
Answer B) the spouse is an affiliate and Rule 144 applies.
Which of the following statements best describes cumulative preferred stock? A) Owners having a continuing claim to their dividends, and all arrears must be paid before any dividends can be paid on common stock B) Owners receive an extra dividend, along with common shareholders, in addition to the preferred dividend. C) Owners are allowed to vote for directors using the cumulative voting procedures D) Owners lose any claim to dividends that are not paid in any one year
Answer: A) Owners having a continuing claim to their dividends, and all arrears must be paid before any dividends can be paid on common stock
Which of the following are subject to the holding period requirements of Rule 144 off the Securities Exchange Act of 1934? I. Registered securities held by a control person II. Unregistered securities held by a noncontrol person III. Registered securities held by a noncontrol person IV. Unregistered securities held by a control person
Answer: B) II and IV
Under Rule 144, which of the following sales are subject to volume limitations? I. Control person selling registered stock held for one year II. Control person selling restricted stock held for two years. C) I and II D) II and IV
Answer: C) I and II
An investor may expect to receive dividends from A) A put option B)A warrant C)An ADR D)a call options
Answer: C) an ADR
A client has 100 shares of GHI when the stock undergoes a split. After the split, the client has A) a proportionately decreased interest in the company B) a proportionately increased interest in the company C) greater exposure D) no effective change in the value of the position
Answer: D no effective change in the value of the position
An employee wishing to obtain long-term capital treatment would prefer to offer A) incentive stock options B) listed stock options C) nonqualified stock options D) portable stock options
Answer A) incentive stock options
An investor who chooses to use preferred stock as an income source instead of bonds would potentially incur which of the following risks? I. Loss of principal can occur II. Price volatility of preferred stock is closely related to interest rates. III. Preferred stock cannot be traded as readily as bonds IV. If the stock is callable, the client's income can be suddenly lowered. A) III & IV B) I, II, III, & IV C) I & II D) I, II, & IV
Answer: D) I, II, & IV
A customer owns cumulative preferred stock (par value of $100) that pays an 8% dividend. The dividend has not been paid this year or for the two previous years. How much must the company pay this customer per share before it may pay dividend to the common stockholders. A) $16 B) $24 C) $0 D) $8
Answer B) $24
Which of the following statements about dividends on common stock is not true? A) Corporations are contractually obligated to pay dividends to their shareholders each year B) Dividends may be paid in cash, property, or stock. C) Only those who are owners of the stock on the record date will receive dividends. D) Dividends represent a pro rata distribution of corporate profits to shareholders.
Answer A) Corporations are contractually obligated to pay dividends to their shareholders each year
An American depositary receipt is A) certificate representing ownership of a foreign security that is on deposit at a U.S. bank B) a document used with interest rate swaps C) a type of derivative used to speculate in foreign currencies D) a certificate representing ownership of a US. security that is deposited in a foreign bank
Answer A) certificate representing ownership of a foreign security that is on deposit at a U.S. bank
ADRs are used to facilitate A) the foreign trading of U.S. government securities B) the domestic trading of foreign securities C) the domestic trading of US government securities D) the foreign trading of domestic securities
Answer B) the domestic trading of foreign securities
Julie owns 100 shares of CCC at $25. CCC declares a 25% stock dividend. After the ex-date, what will she own? I. 125 shares II. 100 shares III. Cost basis of $25 IV. Cost basis of $20 A) I and II B) II and III C) I and IV D) II and IV
Answer C) I and IV.
Investing in emerging market stocks is least likely to expose your client to which of the following risks? A) Liquidity B) Political C) Interest Rates D) Currency
Answer C) Interest Rates
Which of these is among the advantages of including preferred stock in an investor's portfolio? A)The rate of return is likely to keep pace with inflation. B) The maturity date is likely shorter than that of debt securities offered by the same issuer. C) There is an opportunity for increased income if the issuer's profits increase D) Dividends must be paid before any distribution to common stockholders.
Answer D) Dividends must be paid before any distribution to common stockholders.
A corporation would like to offer their employees an opportunity to participate in the future growth of the company. Among the methods you might suggest are A) employee stock options B)subordinated debentures C) voting trust certificates D)preemptive rights
Answer: A) employee stock options
Corporations have found that one way to increase employee motivation is to grant options to options to purchase stock in the company. Incentive (qualified) options differ from nonqualified options in all of the following respects except: A) There is a maximum 10-year limit for exercising an ISO; no such time exists for an NSO. B) ISOs may only be granted to employees, while NSOs may be given to virtually anyone C) the holder of an ISO can recognize capital gain (loss) as a result of exercise and sale, whereas ordinary income (loss) is the result with an NSO D) at the time of the grant, the recipient of the grant of the ISO has no income tax consequence while the recipient of the NSO treats the bargain element as compensation.
Answer: D at the time of the grant, the recipient of the grant of the ISO has no income tax consequence while the recipient of the NSO treats the bargain element as compensation.
