Unit 12 - Equity Securities

Question 1

Who is considered a creditor? A holder of preferred stock or a holder of corporate bonds?

Answer 1

Corporate Bonds

Question 2

Which type of stock typically has voting rights? Common stock or preferred stock?

Answer 2

Common Stock

Question 3

Yes or No: If a company issues a stock dividend (not a cash dividend), does the price of the stock decrease by an equal amount?

Answer 3

Yes

Question 4

Which type of stock typically has preemptive rights? Common stock or preferred stock?

Answer 4

Common Stock - This allows you to maintain your percentage ownership in the company.

Question 5

Which type of stock typically receives preference in dividend payments and company liquidation? Common stock or preferred stock?

Answer 5

Preferred Stock

Question 6

An employee is granted Nonqualified Stock Options (NSOs) to purchase 500 shares at $20. How much income tax will be due if the value of the stock is $30 at the time of exercise and the income tax rate is 28%?

Answer 6

$1,400 - Calculation: ((500 x $30) - (500 x $20)) x 0.28 = $1,400

Question 7

Proponents of which technical theory believe small investors are normally wrong?
Advance/Decline | Odd Lot | Short Interest

Answer 7

Odd Lot