Series 7 - Equity Securities

Front 1

What is the name of an auction market where buyers and sellers are matched by a specialist (designated market maker)

Back 1

NYSE

Front 2

What is the name of an interdealer market linked by computers

Back 2

OTC

Front 3

How is treasury stock used

Back 3

to increase EPS
stock options
for future acquisitions

Front 4

What is formula for outstanding stock

Back 4

issued stock less treasury = o/s stock

Front 5

what are examples of matters that s/h vote on

Back 5

anything affecting portion of ownership such as convertible securities, stock splits, mergers and acquisitions

Front 6

What is cummulative voting

Back 6

total votes can be allocated in any manner

Front 7

What must happen b4 a proxy solicitation is done

Back 7

submit info to SEC

Front 8

What companies are most likely to declare a stock dividend

Back 8

Companies looking to reinvest earnings. stock div cost nothing

Front 9

What are 2 adv of preferred sh

Back 9

paid dividends first
priority over cs during dissolution of corp

Front 10

What is adjustable rate preferred

Back 10

Dividends tied to some rate like treasury

Front 11

How is the preferred stock like bonds

Back 11

value of stock fluctuates in response to interest like bonds

Front 12

Which has the highest dividend--convertible or noncovertible

Back 12

nonconvertible

Front 13

What is CUSIP

Back 13

Common uniform securities identification procedures--d and tracks security

Front 14

what is a stock power

Back 14

a document that duplicates the back of a stock certificate for xfer purposes

Front 15

What is the role of the xfer agent

Back 15

adm work for securities

Front 16

What is the role of the registrar

Back 16

audit xfer agent and insure does not over issue. Must be independent from issuing corp

Front 17

What are the three distinct markets for OTC stocks

Back 17

Nasdaq global select--best--stringent listing req.
NASDAQ global market (high interest and appeal)
Nasdaq capital market (small cap)

Front 18

What is the dividend disbursing agent

Back 18

If securities held in street name, the DDA or xfer agent makes appropriate distributions or xfers to the broker dealer. The broker/dealers dividend department then distributes the dividends or adjusted shares to the appropriate accounts

Front 19

What must a corp do b4 paying dividends

Back 19

SEC requires notification to FINRA or appropriate xchange 10 business days before the record date so that FINRA can establish an ex dividend date

Front 20

What is the ex dividend date

Back 20

2 days b4 record date In the regular way of settlement

Front 21

If stock is settled the regular way (3 days after trade date), when must a s/h purchase a stock in order to receive dividends

Back 21

3 days before record date. The buyer is the owner at settlement date-not the trade date)

Front 22

If stock is settled in a cash setlement way, when must a s/h purchase a stock in order to receive dividends

Back 22

By record date and the ex date is the day after the record date

Front 23

What special handling is required for stock dividends of 25% or more or stock splits of 5:4 or better

Back 23

Ex-date is one day following payable date

Front 24

What is a right

Back 24

short term (30-45 days), one right for each share

Hint 24

Rights are not redeemable by the issuer. But they may be sold in the secondary market or given to someone else to exercise.

Front 25

What is the value of the right b4 ex date

Back 25

Use the cum rights formula:
Market price-subscription price of right /
No of rights to purchase one share PLUS 1

Front 26

What is the value of the right on ex date and after

Back 26

Market price-subscription price of right /
No of rights to purchase one share

Because the market price is trading w/o the value of the rights

Front 27

What is the standby underwriting agreement

Back 27

underwriter buys all unsold shares and resells then to public

Front 28

How are warrants different from rights

Back 28

Warrants are:
long term
on issuance HIGHER than MP
offered as a sweetener to other securities. Both trade in the secondary market

Front 29

What is the function of an ADR

Back 29

facilitates the trading of foreign stocks in us markets Foreign branches of large commercial us banks issue ADRs. No voting rights.

Front 30

What are REITS

Back 30

organized as trusts, follows subchapter M of IRC must have 75% real estate and distribute 90% of earnings to avoid corporate tax. Set up to invest in real estate, mortgages, construction, and development loans.

Front 31

What are the risks and other characteristics of REITS

Back 31

no direct control over portfolio dividends are not qualified, can have problematic loans must rely in management. REITS are publicly traded units and are never redeemed by the issuer like mutual funds are.

Front 32

What are the advantages of ADR

Back 32

Dividends are received in US currency, SEC oversight, transactions in US currency. Currency risk however is not eliminated because distributions on a dr must be converted from foreign currency to US Dollar.

Front 33

What is the function of a registrar

Back 33

To ensure that the number of shares outstanding does not exceed the number of counted 4 on the corporation's books. The registrar audits the transfer agent

Front 34

What is the function of the transfer agent

Back 34

To record the names of stockholders on the corporation book, cancelled old shares, and transfers years into a new owners name.

Front 35

What is cumulative voting

Back 35

Stockholders may cast all of your votess on one position rather than spread them out and doesn't die moved in over two or three positions

Front 36

What is the regular way ex dividend date for cash dividends

Back 36

The regular way ex dividend date is two days before the record date

Front 37

Is a REIT a limited partnership

Back 37

A REIT shares some features with a limited partnership, but it is a different type of business entity. REITs are traded on exchanges and OTC and are professionally managed. REITs do not provide pass through losses. Both REITs and limited partnerships provides pass-through up games to investors

Front 38

What happens in a standby underwriter offering

Back 38

A standby underwriter commits to purchase any unsold shares

Front 39

What are the different types of REITs

Back 39

Equity REITs can hold residential and commercial property. Mortgage REITs hold mortgages on property, and hybrid REITs do both

Front 40

Where are adr issued

Back 40

An American depository receipt is issued by a foreign branch of a domestic bank

Front 41

What is a sub scription right or privilege

Back 41

The right of current shareholders to maintain their fractional ownership of a company by buying a proportional number of shares of any future issue of common stock.

Front 42

What is a preemptive right

Back 42

Shareholders purchasing shares prior to public orders. This is often available only if made explicit in a company's corporate charter

Front 43

Who sets the ex date for New York stock exchange listed issues

Back 43

The ex date is set by the market where the security principally trades

Front 44

Is a stock is sold on November 30 when the record date for a dividend distribution December 1 who receives the dividend, the seller or the buyer

Back 44

Anyone who owns the stock on the record date will receive the dividend. In a regular way trade the seller will still be the owner of record on the record date, as the trade will settle after the record date. In a cash settlement transaction, the buyer will be the owner of record on the record date

Front 45

What are some of the risk of adr

Back 45

Political, market, and foreign currency risk. The risk of lack of liquidity is absorbed by the presence of trading on the market

Front 46

At what price will one share be considered an odd lot on the OTC

Back 46

$175 or above

Front 47

Its stock is sold on the ex dividend date, who is entitled to the dividend

Back 47

stock sold on the ex-dividend date entitles the seller to the dividend. Ex date is 2 business days before the record date

Front 48

The last days at stocks can be bought for cash and still receive the dividend is

Back 48

Record date

Front 49

What feature of preferred stock allows the holder to reduce the risk of inflation

Back 49

Convertible preferred stock. Fixed dollar investment such as bonds and preferred stock are subject to inflation risk. The ability to convert to common stock, which tends to keep pace with inflation, offsets this risk

Front 50

How is the parity price of a common stock calculated

Back 50

Divide the market price by the conversion ratio

Front 51

How is the conversion ratio calculated

Back 51

Divide the par value by the conversion price

Front 52

When is the last day an investor may purchase a stock regular way and receive the dividend

Back 52

In order to receive a cash dividend, an investor must be the owner of record on the close of business on the record date. Because regular way settlement is 3 business days, the customer must purchase the stocks no later than 3 business days before record date

Front 53

What is statutory voting

Back 53

Under statutory voting method, the stock holder must allocate an equal number to each seat

Front 54

ADR owners have many rights. They may receive dividends in US dollars, sale in the secondary market, receive the underlying foreign securities. What is one right they do not have

Back 54

The right to sell the ADR in the foreign market

Front 55

How do you determine the parity price of a common stock

Back 55

Divide the current price of the stock by the conversion ratio

Front 56

What is the interbank market

Back 56

It deals primarily in currencies and is unregulated. It is an over-the-counter market participants are major currency dealers, such as banks. Central banks, such as the Federal Reserve, use the market to try to influence exchange rates

Front 57

How is the floating exchange rate of a nation's currency is determined

Back 57

It fluctuates based on the value of other currencies

Front 58

What is a subscription right or privilege

Back 58

The right of current shareholders to maintain their fractional ownership of a company by buying a proportional number of shares of a future issue of common stock. Purchasing shares prior to public orders is also known as a preemptive right and is often available only if made explicit in a company's corporate charter

Front 59

Which equity has the closest characteristics to bonds and would be most affected by a change in interest rates

Back 59

Preferred stock.

Front 60

What is treasury stock

Back 60

Treasury stock is a company's stock that has been issued, sold through an offering, and then bought back by the company.