Series 65 Test 2- section 3-4

Callable referred stock is advantageous to the issuer because it allows the company to:

replace a high fixed rate issue with a lower issue after the call date

When analyzing a preferred stock, an investment adviser would give the most credence to: -the company's short-term debt obligations -the ability of the company to pay the stated dividend -book value per share -earning per share

the ability of the company to pay the stated dividend

Bail Bonds Inc might issue warrants in connection with a bond issue for which of the following reasons? as an inducement to make the bonds more marketable to lower their interest cost on the issue to increase the marketability of their common stock to increase the number of common shares outstanding

as an inducement to make the bonds more marketable to lower their interests cost on the issue

A company's dividend on its common stock is: mandatory if the company is profitable determined by its board of directors voted on by shareholders specified in the company charter

determined by its board of directors

Under the Uniform Securities Act, all of the following persons may provide investment advice incidental to their normal business without requiring registration as an investment adviser except: -economist -lawyer -teacher -engineer

economist

When using the Dividend Discount Model: -a higher degree of accuracy in forecasting stock prices is obtained with preferred stock -future expected dividends are discounted and compute the present value of the stock -the discount rate is generally lower than the expected rate of return -best results are obtained from stocks that pay irregular dividends.

future expected dividends are discounted to compute the present value of the stock

An investor who chooses to use preferred stock as an income source instead of bonds would potentially incur which of the following risks? -loss of principal -price volatility of preferred stock is closely related to interests rates -preferred stock cannot be traded as readily as bonds -if the stock is callable, the clients income can be suddenly lowered

loss of principal price volatility of preferred stock is closely related to interests rates if the stock is callable, the clients income can be suddenly lowered

Which of the following statements is true? common stockholders do not have the right to subscribe to a rights offering neither common nor preferred stockholders have the right to subscribe to a rights offering both common and preferred stockholders have the right to subscribe to a rights offering preferred stockholders do not have the right to subscribe to a rights offering

preferred stockholders do not have the right to subscribe to a rights offering

As interest rates fall, prices of straight preferred stock will: -rise -remain unaffected -fall -become volatile

rise

Wrap fee accounts would tend to be most suitable for investors who follow a: -passive approach to investing -tactical approach to investing -buy and hold philosophy -strategic approach to the market

tactical approach to investing

An analyst using the dividend growth model would take into account all of the following factors except: the growth of the dividend the current earnings per share the investor's required rate of return the current dividend

the current earnings per share

All of the following statements regarding incentive stock options (ISO) are correct except:

the favorable tax treatment associated with the ISO is lost if the shares acquired through the ISO exercise are sold before one year from the date of grant or two years from the date of exercise

A common stockholder's rights include all of the following except: - electing the board of directors -the right to determine the par value of the stock -preemptive rights -the receipt of dividends if declared by the board of directors

the right to determine the par value of the stock

An investment adviser is preparing an advertisement. Which of the following would be acceptable? - an endorsement on radio or TV from a celebrity who is a client of the firm -identifying his best investment recommendations for the past 6 months -offering to provide his investment recommendations for the past 12 months -promoting his system of charts and formulas while mentioning their limitations and difficulties

offering to provide his investment recommendation for the past 12 months promoting his system of charts and formulas while mentioning their limitations and difficulties

Which of the following would meet the USA's definition of a federal covered advisor? An investment advisor who:

is registered with the SEC

A customer owns cumulative preferred stock (per value of $100) that pays an 8% dividend. The dividend has not been paid this year or for the 2 previous years. How much must the company pay the customer per share before it may pay dividends to the common stockholder? -$16.00 -$24.00 -$8.00 -$0.00

$24.00

Board of directors DCC omitted dividends in 2010 $100 6%

$6

A corporation with a 7% $100 per cumulative preferred stockholders last year. Before the company can pay, common dividends, how much must it pay each preferred share outstanding? -$9.00 -$15.00 -$3.00 -$7.00

$9.00

Investing in emerging market stocks primarily exposes your client to which of the following risks? -Currency -Inflation -Liquidity -Political

Currency Inflation Liquidity Political

All of the following pay divided except?

Warrants

Which of the statements about corporate dividends are true:

Dividends represent a pro rata distribution of corporate profits to shareholders. Dividends may be paid in cash, property or stock

1996 NSMIA

Federal covered advisor

Investing in an emerging market mutual fund subjects the investor to all of the following risks except:

Liquidity

Kapco Investment Advisers current has $138 Million in assets under management and has office in Colorado and Utah. Kapco's only clients in Utah are 2 insurance companies domiciled in the state. Kapco has no office in New Mexico but does services the accounts of 3 middle class individuals. Kapco recently has opened an advisory account for a pension plan for a corporation located in Montana. Under the Uniform Securities Act, Kapco would have to register with: -the administrator in each state in which it does business -the administrator in the states o Colorado and Utah -the administrator in the states of Montana and New Mexico -The SEC

The SEC

Which of the following statements accurately describes the doctrine of the limited liability? a shareholder of a corporation has some personal liability for the corporations debts a shareholder of a corporation is not personally liable for the corporations debts a partner is not personally liable for the debts of the partnership the owner of a sole proprietorship is not personally liable for the proprietorships debts

a shareholder of a corporation is not personally liable for the corporations debts

An investment in which of the following would expose the investor to the greatest capital risk? -debentures -common stock -mortgage bonds -preferred stock

common stock

Which of the following statements best describes cumulative preferred stock? owners have a continuing claim to their dividends, and all arrears must be paid before any dividends can be paid on common stock. owners are allowed to vote for directors using the cumulative voting procedures owners lose any claim to dividends that are not paid in any one year owners receive an extra dividend along with common shareholders in addition to the preferred dividend

owners have a continuing claim to their divided, and all arrears must be paid before any dividends can be paid on common stock

An investment adviser with custody of customer funds and securities must send the customer a statement of account activity . no less frequently than: -monthly -with every transaction -annually -quarterly

quarterly