Special Securities Flashcards
A corporation wishes to raise funds to build a new manufacturing facility. Which method is suitable for the issuer to obtain financing?
A. Force conversion of outstanding convertible preferred
B. Split the outstanding shares of common stock 2 for 1
C. Issue rights to outstanding shares of common stock
D. Call outstanding convertible preferred
C. Issue rights to outstanding shares of common stock
All of the following terms describe rights EXCEPT:
A. exercisable
B. negotiable
C. giftable
D. redeemable
D. redeemable
Which statement is TRUE regarding rights?
A. Rights give the holder the long term option to buy stock
B. Rights typically give the holder a 6-9 month option to buy stock
C. The exercise price of a right is set at a premium to the stock’s current market price
D. The exercise price of a right is set at a discount to the stock’s current market price
D. The exercise price of a right is set at a discount to the stock’s current market price
A customer owns 256 shares of ABC common stock. ABC declares a rights offering, with the terms being that for every 15 rights tendered, a shareholder may purchase one additional share at $24 per share. Any fractional rights holding may be rounded up to buy an additional share. If this shareholder wishes to subscribe, which statement is TRUE?
A. The shareholder can buy a maximum of 15 shares by paying $360
B. The shareholder can buy a maximum of 16 shares by paying $384
C. The shareholder can buy a maximum of 17 shares by paying $408
D. The shareholder can buy a maximum of 18 shares by paying $432
D. The shareholder can buy a maximum of 18 shares by paying $432
ABC Corporation has declared a rights offering to stockholders of record on Tuesday, June 22nd. Under the offer, shareholders need 20 rights to subscribe to 1 new share at a price of $60. Fractional shares can be rounded up to purchase 1 full share. A customer owning 240 shares wishes to subscribe. The market price of the stock is currently $73. The customer can buy
12 shares for $720
At the time of issuance, a warrant has
time value
Which statement is TRUE regarding warrants?
A Warrants give the holder the long term option to buy or sell stock
B Warrants give the holder a maximum 9 month option to buy stock
C The exercise price of a warrant floats with the stock’s current market price
D The exercise price of a warrant is set at a premium to the stock’s current market price
D The exercise price of a warrant is set at a premium to the stock’s current market price
Which statement is TRUE regarding warrants?
A Warrants are typically issued with an exercise price that is higher than the stock’s current market price and would be exercised when the stock’s market price is below the warrant strike price
B Warrants are typically issued with an exercise price that is higher than the stock’s current market price and would be exercised when the stock’s market price is above the warrant strike price
C Warrants are typically issued with an exercise price that is lower than the stock’s current market price and would be exercised when the stock’s market price is below the warrant strike price
D Warrants are typically issued with an exercise price that is lower than the stock’s current market price and would be exercised when the stock’s market price is above the warrant strike price
B Warrants are typically issued with an exercise price that is higher than the stock’s current market price and would be exercised when the stock’s market price is above the warrant strike price
A corporation is offering a new issue consisting of 100,000 units at $200 each. Each unit consists of 2 shares of preferred stock and a warrant to buy one additional common share. A full warrant allows the purchase of an additional common share at $5. If all the warrants are exercised, the corporation will have
200,000 preferred shares and 100,000 common shares
Which statement is TRUE about the intrinsic value of rights and warrants when issued?
A Warrants have no time value but significant intrinsic value
B Warrants have no intrinsic value but significant time value
C Rights have limited time value but no intrinsic value
D Rights have intrinsic value and substantial time value
B Warrants have no intrinsic value but significant time value
An ADR is a
foreign security held in foreign branches of US branches
All of the following statements are true about American Depositary Receipts EXCEPT:
A ADRs facilitate domestic trading of foreign securities
B ADR holders receive dividends
C ADR holders have voting and pre-emptive rights
D ADRs are issued by domestic banks
C ADR holders have voting and pre-emptive rights
An ADR has been issued where each ADR equals 10 ordinary shares of the foreign issuer. If a client wished to buy enough ADRs to cover 1,000 ordinary shares, how many ADRs must be purchased?
100
Which statement is TRUE regarding ADRs?
A Dividends are declared by the issuer of the underlying stock in U.S. dollars while investors receive dividend payments in U.S. dollars
B Dividends are declared by the issuer of the underlying stock in the foreign currency while investors receive dividend payments in the foreign currency
C Dividends are declared by the issuer of the underlying stock in U.S. dollars while investors receive dividend payments in the foreign currency
D Dividends are declared by the issuer of the underlying stock in the foreign currency while investors receive dividend payments in U.S. dollars
D Dividends are declared by the issuer of the underlying stock in the foreign currency while investors receive dividend payments in U.S. dollars
Which statement is TRUE about non-sponsored ADRs?
A These ADRs are created without the participation of the foreign corporation
B These ADRs are sponsored by the country in which the foreign corporation resides
C These ADRs must provide financial statements to the ADR holder in English
D These ADRs are typically NASDAQ or NYSE listed
A These ADRs are created without the participation of the foreign corporation
