Series 7 Study

Question 1

Conversion Ratio Equation

Answer 1

Par value of preferred stock/ conversion price

Question 2

Statutory vs Cumulative Voting

Answer 2

A method of voting that gives larger, more substantial stockholders a greater degree of voting power over smaller, less substantial stockholders is statutory voting. Under statutory voting, each stockholder has one vote per share, per election.

Question 3

How to find the cost basis after a stock dividend

Answer 3

Initial cost of stocks/ total number of shares now owned.

Question 4

Series K Preferred Stock

Answer 4

Series K preferred stock has the following characteristics:
It is issued by a financial service company
It has no maturity date
It pays a fixed rate for a period and then switches to a floating rate (usually based on LIBOR)
It’s dividend is non-cumulative and it may not carry voting rights
It is callable at the option of the issuer

Question 5

Rule 145

Answer 5

Rule 145 applies to mergers, consolidations, reclassifications of securities, or transfers of corporate assets. Rule 145 requires a company to provide written disclosures to shareholders in connection with the previously listed corporate actions. Stock splits, dividends, and the resulting changes in par value are specifically exempted from filing under Rule 145.

Question 6

Agent/ Broker vs Principal/ Dealer

Answer 6

A broker-dealer who charges customers a commission is acting as an agent or broker. A broker-dealer who charges customers a markup or markdown is acting as a principal or dealer

Question 7

What is a bond’s “duration”?

Answer 7

Duration measures price sensitivity for fixed-income securities given changes in interest rates. For example, a bond with a seven-year duration would experience a 7% change in price for every 1% change in market interest rates.

Question 8

A bond on which a call notice has been issued is purchased by a customer. Which yield must be disclosed on the confirmation?

Yield to Call
Yield to Maturity
The lower of the two

Answer 8

The Yield to Call.

When bonds are called, the yield to call must be disclosed on the confirmation. If a call notice has not been issued, the lower of the yield to call or the yield to maturity must be disclosed.

Question 9

How to find current yield

Answer 9

Yearly Interest Payment/ Market Price

Question 10

CPI stands for?

And it measures?

Answer 10

Consumer Price Index

Measures Inflation

Question 11

An open-end investment company with a NAV of $22.20 and a sales charge of 8% would have an offer price of what amount?

Answer 11

= NAV/(100%-sales charge%)
= 22.20/(100%-8%)
= 22.20/(92%)
= 24.13