Chapter 2

Question 1

Authorized Stock

Answer 1

Total number of shares corporate charter states a company can authorize

Question 2

Issued Stock

Answer 2

Authorized stock that has been sold to investors

Question 3

Outstanding Stock

Answer 3

All shares company has issued that are in the hands of investors

Question 4

Treasury stock

Answer 4

Stock company issued and then re-acquired later

Question 5

Penny Stock Cold Calling Disclosures (4)

Answer 5

1. Name of stock
2. # of shares to be purchased
3. Quote
4. Commission firm and rep will recieve

Question 6

“Established” customer qualifications (2)

Answer 6

Held an account with BD for at least one year, has made at least three penny stock purchases of different issuers on different days

Question 7

Two things that must be done to solicit a penny stock

Answer 7

Suitability statement signed by customer, 4 disclosures must be made

Question 8

Cost Basis Calculation after receiving dividends

Answer 8

Original cost / New # of shares

Question 9

Dividend declaration date

Answer 9

When company BOD approves a dividend

Question 10

Ex-dividend date

Answer 10

One business day before the record date

Question 11

Record date

Answer 11

When stockholders of record receive dividend

Question 12

Formula for remembering div disbursement dates

Answer 12

DERP

Question 13

Statutory voting

Answer 13

One vote per item per share

Question 14

Cumulative voting

Answer 14

Can allocate total votes in any manner chosen

Question 15

Preemptive Right

Answer 15

Right to maintain proportionate share of ownership in a corporation

Question 16

Reasons for common stock in a portfolio

Answer 16

Capital appreciation, dividends, hedge against inflation

Question 17

Action that requires shareholder approval

Answer 17

Changing company name

Question 18

Who declares ex-div dates for listed securities

Answer 18

NYSE

Question 19

Benefits of Common Stock (2)

Answer 19

1. Dividend preference
2. Priority at dissolution over common stock

Question 20

Straight Preferred Stock

Answer 20

No special features beyond stated dividend payment. Missed payments not paid to stockholder

Question 21

Cumulative Preferred Stock

Answer 21

Stock that accrues payments due when dividends are suspended or reduced

Question 22

Feature of callable preferred at call

Answer 22

Premium exceeding stock’s par value may be paud

Question 23

ADR taxation

Answer 23

Dividends paid to foreign govt’s are taxed under that issuer

Question 24

What Rule 144 applies to

Answer 24

Shares sold on a nonstandard offering that re subject to resale restrictions or by control persons

Question 25

Restricted stock

Answer 25

Stock that was acquired elsewhere besides a registered public offering

Question 26

How long restricted stock has to be held before it can be sold

Answer 26

6 months

Question 27

Control Stock

Answer 27

That which is owned by directors, officers or those with 10% or more stake in the company

Question 28

If a married couple owns more than 10% of a company together are they both control people?

Answer 28

Yes

Question 29

Volume limitations on Rule 144 are the greater of...

Answer 29

1. 1% of outstanding shares of company 2. Average weekly trading volume over most recent four weeks

Question 30

With ADRs what currency are dividends received in

Answer 30

US Dollars

Question 31

What do holders of ADRS have the right to do with their shares

Answer 31

Request the underlying shares to be issued to them directly

Question 32

What preferred stock is known for not having

Answer 32

Voting rights

Question 33

What a stockholder can do with rights

Answer 33

1. Exercise them to buy stock 2. Sell the rights and profit from their fair market value

Question 34

Characteristics of warrants (3)

Answer 34

1. Long term 2. Bundled with other securities 3. Allow someone to purchase shares at a price above market value when shares were issued

Question 35

What happens in a forward split

Answer 35

Number of shares increases and price decreases

Question 36

What happens in a reverse split

Answer 36

Number of shares decreases and price increases

Question 37

Tender Offer

Answer 37

Offer to buy a security directly from owners instead of through a 3rd party

Question 38

What tender offers are used for (2)

Answer 38

1. When looking to acquire another company through buying their shares 2. When company makes a bid to take over another company using convertible securities

Question 39

Is receiving additional shares or cash taxable?

Answer 39

Cash

Question 40

Primary purpose of syndicate desk in terms of equity offering

Answer 40

Build order book and allocate stock

Question 41

Do ADR's have to register under the Securities Act of 1933

Answer 41

Yes

Question 42

If a firm agrees to repurchase shares at no less than original sales price, is that allowed?

Answer 42

No it's strictly prohibited as manipulative

Question 43

Cost basis of inherited mutual fund

Answer 43

NAV of shares when owner dies

Question 44

Who keeps of shareholders in a stock split

Answer 44

Transfer agent

Question 45

Who must approve a mutual fund advertisement

Answer 45

Registered principal of rep's firm