Exam Questions Flashcards
Dividends on preferred stock may only be paid in:
A: common shares of another issuer
B: common shares of the same issuer
C: cash
D: preferred stock of the same issuer
C
FINRA sets which date?
A: declaration date
B: record date
C: ex date
D: payable date
C
Which of the following actions taken by a corporation will raise additional capital?
A: declaration of a stock split
B: announcement of a call on all convertible stock at par
C: declaration of a stock dividend
D: announcement of a rights distribution allowing existing shareholders to buy stock
D
Voting of the common stockholder is required for all of the following except
A: when a corporation wishes to issue convertible securities
B: when a shareholder decides to accept a tender offer
C: when a corporation declares a stock split
D: when a corporation declares a cash dividend
D
All of the following are methods of dividend payment except:
A: cash
B: stock
C: rights
D: product
C
A corporation has issued $100 par, 8% cumulative convertible stock, callable at par. The preferred stock is convertible into 1.4 shares of common stock. Currently the preferred stock is trading at $102 while the common stock is trading at $75.50. The corporation calls the preferred stock at par plus accrued dividends of $2 per share. Once the notice of call has been circulated, it can be expected that:
A: the number of common shares outstanding and earnings per share will remain the same
B: the number of common shares outstanding will remain the same and earnings per share will decrease
C: the number of common shares outstanding will increase and earnings per share will remain the same
D: the number of common shares outstanding will increase and earnings per share will decrease
D
A customer buys 100 shares preferred stock at $110 per share. The par value is $100. The dividend rate is 5%. Each dividend payment will be:
A: $250
B: $275
C: $500
D: $550
A
5% of $100 = $5 x 100 shares = $500 / 2 (preferred dividends payec semi-annually) = $250
A corporation has issued $100 par, 8% cumulative convertible preferred stock, callable at par. The preferred is convertible into 1.4 shares of common stock. The preferred stock is trading at $102 while the common stock is trading at $75.50. The corporation calls the preferred stock at par plus accrued interest of $2 per share. If the customer buys 100 preferred shares, converts and then sells the common shares, the profit would be (ignoring commissions):
A: $200
B: $320
C: $370
D: $570
C 100 preferred shares x $102 = $10,200 Each share converted into 1.4 shares - 100 x 1.4 = 140 common shares 140 x $75.50 = $10,570 $10,570-$10,200=$370
A customer owns 1000 common shares of ABC Corporation. Which actions will dilute the shareholder’s equity?
A: ABC declares a 5% dividend
B: ABC declares that it will call its convertible preferred stock, which is currently trading at a premium
C: ABC declares that it will issue an additional $100,000,000 in bonds
D: ABC declares a 4:1 stock split
B
A corporation issues $100 par convertible preferred stock, convertible at $10 per share, when the market price of common is currently $5. The preferred is issued under an “anti-dilutive” covenant.” If the company declares a 25% stock dividend, whic statements are true ?
A: the conversion price remains at $10
B: the conversion price is adjusted to $8
C: the conversion ratio remains at 10:1
D: the conversion ratio is adjusted to 12.5:1
B and D
XYZ Corporation wants to raise additional capital without using an underwriter by issuing rights to its existing shareholders. The company needs to raise $40,000,000 to build a new manufacturing plant. Its common stock is currently trading at $43 and the subscription price for a rights holder is set at $40. The company has 2,000,000 shares outstanding. Which statement is true for the owner of XYZ common shares?
A: 50,000 rights are received alowing the holder to buy 50,000 shares
B: 100,000 rights are received allowing the holder to buy 100,000 shares
C: 50,000 rights are received allowing the holder to buy 100,000 shares
D: 100,000 rights are received allowing the holder to buy 50,000 shares
D
2,000,000 shares=2,000,000 rights
$40,000,000/$40=1,000,000 new shares
2,000,000 rights to cover 1,000,000 new shares = 2:1
Holder therefore can convert 100,000 rights into 50,000 shares
A customer owns 200 shares of ABC stock. ABC is having a rights offering where 20 rights are needed to subscribe to 1 new share. The customer will receive:
A: 1 right
B: 10 rights
C: 100 rights
D: 200 rights
D
200 shares = 200 rights
PDQ company $1 par stock is currently trading at $55. PDQ is paying a quarterly common dividend of $1.10 per share. The current yield of PDQ stock is:
A: 2.0%
B: 4.4%
C: 8.0%
D: 44.0%
C
ANNUAL income/market price=current yield (CY)
$4.40/$55=8.0%
Which statement is true when comparing convertible preferred stock to non-convertible preferred stock?
A: convertible preferred issues will have a higher yield than similar non-convertible yields of the same issuer
B: non-convertible preferred shares and convertible shares of the same issuer typically have the same yield
C: non-convertible preferred shares will have a higher yield than similar convertible shares of the same issuer
D: non-convertible preferred stockholders will benefit as the common stock price rises
C
A convertible preferred stockholder can convert to common if the common’s price rises, so growth potential is considered. Because of this, yields for convertible are lower than non-convertible
A company’s common stock is selling in the market at a “multiple of 10”. If the market price of the common stock is $10, which statement is true?
A: the company has paid dividends of $1 per share this year
B: the company has earnings of $1 per share this year
C: the company has paid dividends of $100 per share this year
D: the company has earnings of $100 per share this year
B
When a stock is selling at multiple of 10, this means the market price is 10 times the current earnings per share
