Special Securities

All of the following securities represent equity ownership of a corporation EXCEPT: A. Convertible preferred stock B. Warrants C. Preferred stock D. Common stock

B. Warrants

The exercise price of a warrant is set at issuance at: A. a discount to the market price of the common stock B. a premium to the market price of the common stock C. the market price of the common stock D. any price designated by the issuer

B. a premium to the market price of the common stock

An ADR has been issued where each ADR equals 10 ordinary shares of the foreign issuer. If a client wished to buy enough ADRs to cover 1,000 ordinary shares, how many ADRs must be purchased? A. 1 B. 10 C. 100 D. 1,000

C. 100

Dividends are paid to the holders of which of the following? A. ADRs B. Rights C. Treasury Stock D. Warrants

A. ADRs

If a corporation wishes to sell additional shares, which of the following persons can subscribe using pre-emptive rights? A. Common stockholders B. Preferred stockholders C. Convertible preferred stockholders D. Bondholders

A. Common stockholders

American Depositary Receipts would trade on all of the following exchanges EXCEPT the: A. London Stock Exchange B. New York Stock Exchange C. NASDAQ Stock Market D. American Stock Exchange

A. London Stock Exchange

Which statement is TRUE about non-sponsored ADRs? A. These ADRs are created without the participation of the foreign corporation B. These ADRs are sponsored by the country in which the foreign corporation resides C. These ADRs must provide financial statements to the ADR holder in English D. These ADRs are typically NASDAQ or NYSE listed.

A. These ADRs are created without the participation of the foreign corporation

At issuance, warrants have: A. time value B. intrinsic value C. both time value and intrinsic value D. neither time value nor intrinsic value

A. time value

A customer owns 210 shares of ABC common stock. ABC declares a rights offering, with the terms being that for every 20 rights tendered, a shareholder may purchase one additional share at $20 per share. Any fractional rights holding may be rounded up to buy an additional share. If this shareholder wishes to subscribe, which statement is TRUE? A. The shareholder can buy a maximum of 10 shares by paying $20 B. The shareholder can buy a maximum of 11 shares by paying $220 C. The shareholder can buy a maximum of 11 shares by paying $420 D. The shareholder can buy a maximum of 110 shares by paying $2,200

B. The shareholder can buy a maximum of 11 shares by paying $220

Which statement is TRUE about the intrinsic value of rights and warrants when issued? A. Warrants have no time value but significant intrinsic value B. Warrants have no intrinsic value but significant time value C. Rights have limited time value but no intrinsic value D. Rights have intrinsic value and substantial time value

B. Warrants have no intrinsic value but significant time value

ADRs are used to: A. facilitate trading of domestic securities in foreign countries B. facilitate trading of foreign securities in the United States C. allow trading of rights on exchanges D. allow trading of warrants on exchanges

B. facilitate trading of foreign securities in the United States

A corporation is offering a new issue consisting of 100,000 units at $200 each. Each unit consists of 2 shares of preferred stock and a warrant to buy one half additional common share. A full warrant allows the purchase of an additional common share at $5. If all the warrants are exercised, the corporation will have outstanding: A. 100,000 preferred shares and 100,000 common shares B. 200,000 preferred shares and 100,000 common shares C. 200,000 preferred shares and 50,000 common shares D. 50,000 preferred shares and 100,000 common shares

C. 200,000 preferred shares and 50,000 common shares

Which statement is TRUE about American Depositary Receipts? A. ADR holders have voting and pre-emptive rights B. ADRs facilitate domestic trading of U.S. securities in foreign markets C. holders are entitled to dividends if declared D. ADRs are issued by foreign banks

C. holders are entitled to dividends if declared

Which of the following actions taken by a corporation will raise additional capital? A. Declaration of a stock split B. Announcement of a call of all convertible preferred shares at par C. Declaration of a stock dividend D. Announcement of a rights distribution allowing existing shareholders to buy the additional stock

D. Announcement of a rights distribution allowing existing shareholders to buy the additional stock

ABC Corporation has recently completed a $20,000,000 offering of 10% debentures due in 2035. Each bond was sold with a warrant attached that allows the holder to buy 10 shares of ABC common stock at $50 per share. The market price of ABC is currently $42. All of the following statements are true EXCEPT: A. The warrants help to increase the issue's marketability B. The warrants help to lower the interest cost on the issue C. The warrants are "under water" D. The company will raise an additional $5,000,000 if the warrants are exercised

D. The company will raise an additional $5,000,000 if the warrants are exercised

American Depositary Receipts pay dividends in: A. LIBOR Units B. European Currency Units C. Foreign Currency D. U.S. Dollars

D. U.S. Dollars