Chapter 3- Equity securities

Question 1

_______ is previously issued shares that are no longer outstanding.

Answer 1

Treasury stock

Question 2

________ is most beneficial for small shareholders.

Answer 2

Cumulative voting

Question 3

restricted stock

Answer 3

Unregistered stock that is acquired through a private placement or as compensation for senior executives of an issuer
- Mandatory six-month holding period

Question 4

control (affiliated) stock

Answer 4

Registered stock that is part of an issuer’s public float and purchased in the open market by officers, directors, or greater than 10% shareholders of the issuer
- No minimum required holding period

Question 5

Rule 144 Maximum sale allowed is the greater of:
_____% of the outstanding shares or the average weekly trading volume over the ____

Answer 5

1%; last 4 weeks

Question 6

what type of securities are acquired through a private placement?

Answer 6

restricted securities

Question 7

cyclical

Answer 7

Stock of companies whose value fluctuates with the business cycle (e.g., household appliances, automobiles)

Question 8

defensive

Answer 8

Stock of companies that are resistant to recession (e.g.,utilities, tobacco)

Question 9

blue chip

Answer 9

Stock of strong, well-established, dividend paying companies

Question 10

income

Answer 10

Stock of companies that pay higher than average dividends in relation to market price

Question 11

ADR

Answer 11

Facilitates the trading of foreign stock is U.S. markets

Question 12

growth

Answer 12

Stock of companies with sales and earnings that are expanding faster than the economy; pay little (if any) dividends

Question 13

ALLOWS STOCKHOLDERS TO
SHARE IN DIVIDENDS PAID TO
COMMON STOCKHOLDERS

Answer 13

participating

Question 14

PERMITS THE ISSUER
TO REMOVE THE STOCK
FROM THE MARKET

Answer 14

callable

Question 15

____ ____ HAVE
IMMEDIATE INTRINSIC VALUE

Answer 15

PREEMPTIVE RIGHTS

Question 16

WARRANTS MUST BE EXERCISED WITHIN
A _____ PERIOD FROM ISSUANCE

Answer 16

long

Question 17

ONLY ____ BROKER-DEALER
CAN BE USED WHEN AN ISSUER
IS PURCHASING ITS OWN STOCK

Answer 17

ONE

Question 18

bonds with higher rating have ___ yields and ___ prices

Answer 18

lower; higher

Question 19

who pays for the ratings

Answer 19

issuers

Question 20

as it related to bond rating, whats the concern?

Answer 20

risk of default

Question 21

1.00 % = ____ basis points

0.01% = ___ basis points

Answer 21

100; 1

Question 22

Non-competitive bids are filled _____.

_____ bids determine price.

The ____ accepted price/highest yield clears the auction.

Answer 22

first; Competitive; lowest

Question 23

Transportation Revenue

Answer 23

Use tolls and user fees

Question 24

Industrial Development Bond (IDB)

Answer 24

Issued by a municipality and secured by a lease agreement with a corporate user of the facility

Question 25

Private Activity

Answer 25

A bond in which more than 10% of the proceeds will benefit a private entity (e.g., a sports team)

Question 26

Moral Obligation

Answer 26

If project revenue is insufficient, the state legislature is morally (but not legally)
obligated for the shortfall

Question 27

Double Barreled

Answer 27

Two sources - project revenue and tax dollars (from GO bonds)

Question 28

Special Tax

Answer 28

Excise taxes on purchases, such as gasoline, tobacco, and liquor

Question 29

Special Assessment

Answer 29

Assessments on the benefitting properties; used for sidewalks, sewers, etc.

Question 30

Bond issued outside of the U.S., but pays debt service in U.S. dollars

Answer 30

eurodollar

Question 31

COLLATERAL TRUST

Answer 31

Secured by third-party securities that are owned by the issuer

Question 32

Treasury debt

Answer 32

T-BILL

Question 33

Involves two transactions

Answer 33

REPO

Question 34

Unsecured bank debt

Answer 34

CD

Question 35

Unsecured corporate debt

Answer 35

COMMERCIAL PAPER

Question 36

Used for foreign trade

Answer 36

bankers acceptance (imports/exports)