Equities: Special Securities

Question 1

Equities- Equities: Special Securities
Warrants
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1 )A warrant is a long term option to what 2)Warrants are attached to? Why? 3) Warrants trade alongside what 4)The attachment of the warrant to the senior security offering allows the issuer to what 5) At issuance, the exercise price of the warrant is set higher or lower than stocks current market price? 5.1) “intrinsic value” at issuance? 5.2)In order for the warrant to have intrinsic value? 6) warrants typically are good for how long? 6.1) longer than rights? 6.2) warrants that are perpetual with no term trade where? 7)Warrant valuation is directly influenced by? 8)the longer the warrant the greater or lower the value? 9) warrant valuation reflects market expectations based on what 10)warrants have an indeterminate value at issuance? 11) warrants are exercised only if the market price of the common rises above the exercise price of the warrant? 12) common stock raises from $30 to $35 since warrant is ariginally at $1 & it allows purchase of common at $30, the warrant raises to how much?

Answer 1

1) buy common stock at a fixed price
2) senior securities (preferred stock and bond) offerings, make them more attractive to investors 3) common stock 4) lower the interest rate (or dividend rate for preferred stock) that must be paid to get the issue sold. 5) higher 5.1)no 5.2) market price of the common stock must rise above the exercise price of the warrant 6) 5 years 6.1) yes 6.2) on exchange 7)common stock price 8) higher 9) future corporate earnings 10) correct 11) true 12)5

Question 2

Equities- Equities: Special Securities
Rights
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1) rights are typically good for how long 2)granted to existing shareholders that allow them to buy new common shares at a discount? 2.1) this right is called 2.2) the discount reflects it’s 3) This allows corporations to raise additional capital without the use of? 4) rights can be exercised or sold alongside common stock until their expiration? 5) trade separately form the stock on the exchange?

Answer 2

1)30-60 days 2) true 2.1)pre-emptive right 2.2 )intrinsic value 3)underwriter; instead the monies are raised directly from existing shareholders. 4) true 5) true

Question 3

Equities- Equities: Special Securities
American Depositary Receipts
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1) ADR - American Depositary Receipt - is the vehicle for trading what 2) Instead of a stock certificate they get what 3) Foreign companies don’t want their shares directly issued in the U.S. because? 4)Large commercial banks are happy to sponsor ADR programs because? 5)The bank holds foreign securities in the country of origin or US 5.1) then issues receipts in the U.S. backed by foreign security? 6) ADRs receive dividends? 6.1) dividend are declared in foreign currency and converted and paid in U.S. $? 7)ADRs have voting nor pre-emptive right? 7.1) who owns the right? 8) ADRs are registered with who? 9) Each ADR issued cover 1 share of the foreign issuer? 10) dividend amount subject to foreign currency exchange fluctuations? 11) sponsored vs. non sponsored ADR 11.1) do exchanges listing ADR require sponsored? 11.2) over the count require? 12) are Issuers of sponsored ADRs agree to provide financial statements in English? 13) are ADR traded on all stock exchanges? 13.1) trade on foreign exchanges? 13.2) trade on the Options or Futures exchanges.

Answer 3

1) foreign securities in U.S 2) an ADR 3) cost and difficulty of registration with SEC 4)bank takes a currency exchange fee converting the dividend from foreign currency to us 5) origin 5.1) true benefits 6) yes 6.1) True 7) no 7.1) the bank who owns the share 8)SEC 9) no 10) yes 11) “sponsored” by the foreign company; that is they are packaged by the depositary bank with the company’s participation, “ non sponsored are packaged with out foreign companies participation 11.1) yes 11.2) no 12) yes 13) yes 13.1) no 13.2) no

Question 4

Equities: Special Securities
TRADING OF EQUITY SECURITIES
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1) Equity and equity-related securities trade where
2) why trade Over-The-Counter
3) small companies will typically trade where
4) what is T + 2

Answer 4

1) over the counter or on an exchange 2) if they are unlisted=less stringent listing standards. 3) OTC 4) When a trade is done in an equity or equity-related security [non otc], settlement occurs 2 business days after trade date