Unit 1: Equities

Question 1

Security

Answer 1

intangible financial asset that can be bought, sold and gifted between persons

Question 2

Howey Test

Answer 2

> determines what is a security

1) money invested
2) in common enterprise
3) for profit
4) managed by a third party

Question 3

Authorized stock

Answer 3

total # of shares a corporation can issue

Question 4

Issued stock

Answer 4

portion of authorized shares sold to investors

Question 5

Outstanding stock

Answer 5

portion of issued stock still held by investors

Question 6

Treasury stock

Answer 6

portion of issued stock that has been bought back by corporation (no benefits of issued stock)

Question 7

Penny stock

Answer 7

> unlisted security trading at >$5/share
high risk
before buying, buyers must receive risk disclosure document from seller, must sign it and return
monthly account statement is provided to owner

Question 8

Ex-dividend date (ex-date)

Answer 8

date before which stock must be purchased to receive dividend

Question 9

Statutory voting

Answer 9

stockholder can cast one vote per share owned for each item on ballot

Question 10

Cumulative voting

Answer 10

stockholder can allocate total votes in any way they choose

Question 11

Stock rights

Answer 11

> entitle existing stockholders to maintain % ownership in event corporation decides to issue more stock
able to buy newly issued shares before public has access

Question 12

Warrant

Answer 12

> grants owner right to purchase security at a specified rate in future, usually higher than CMV
usually accompanies bonds to make them more attractive

Question 13

Restricted stock

Answer 13

> stock acquired NOT via registered public offering

>may not be sold until held for six months

Question 14

Control stock

Answer 14

> when an individual or people within same family cumulatively own 10% or more of shares
subject to volume limitations when selling (either 1% of outstanding shares or weekly trading average)

Question 15

American depository receipts (ADRs)

Answer 15

> equity security that allows Americans to invest abroad
common shares purchased in foreign market by U.S. bank
traded on public market, bought/sold in U.S. dollars
not subject to foreign taxes, but subject to capital gain taxes

Question 16

Preferred stock

Answer 16

>stock with fixed rate of return
>no voting rights
>sales settle in two biz days
>can be callable (bought back by corp.)
>can be converted to common stock