Series 7 Domain 3 (Quiz 2): Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

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Note: We designed four (4) parts of practice quizzes for each Domain. Each part has 25 questions.

Domain 3 (part 2): Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records. (25 questions)

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SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

When compared to statutory voting, cumulative voting gives an advantage to

A) management rather than the board of directors.

B) minority stockholders.

C) majority stockholders.

D) participating preferred stockholders.

None

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

A corporation is having a rights offering. The terms of the offering require eight rights plus $88 to purchase one share. With the stock's current market price at $112 per share, the theoretical value of one right on the ex-rights date is

A) $2.67.

B) $3.00.

C) $0.30.

D) $0.27.

None

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

After a company splits its stock 2 for 1, an investor who owns 100 shares receives

A) notice to send in the current certificate to be replaced by a new certificate for 200 shares.

B) notice that the investor's 100-share certificate now represents 200 shares.

C) another certificate for 200 shares.

D) another certificate for 100 shares.

None

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Holders of common shares may generally vote on

A) which member of the board of directors should be chairman.

B) whether a cash dividend is to be declared.

C) whether the company should issue additional preferred stock.

D) whether an administrative assistant should be promoted to management.

None

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Which of the following would least likely occur when a corporation engaged in a rights offering?

A) After successful completion of the offering, the market price would rise slightly.

B) After successful completion of the offering, the market price would decline slightly.

C) The corporation would use a standby underwriter.

D) The number of outstanding shares would increase.

None

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Stockholders' preemptive rights include the right to

A) maintain proportionate ownership interest in the corporation.

B) sell stock back to the issuing corporation.

C) purchase Treasury stock.

D) serve as an officer on the board of directors.

None

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

A corporation wishes to raise additional capital by making use of a rights offering. One of your clients owns 200 shares of the issuing corporation's common stock and 100 shares of its preferred stock. The terms of the offering state that four rights will be necessary to purchase one new share at the subscription price of $20. The current market price of the stock is $24 per share. How many rights will your client receive?

A) 50

B) 300

C) 200

D) 75

None

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Gargantuan Computers, Inc., (GCI) conducts a rights offering to its current shareholders at $50 per share, plus one right. If the current market price of GCI is $70, what is the value of one right before the stock trades ex-rights?

A) 300

B) 10

C) 5

D) 15

None

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

One of your customers is looking for growth with some income. It would not be suitable for you to recommend

A) common stock.

B) ADRs.

C) convertible preferred stock.

D) warrants with a five-year expiration.

None

10.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Which of the following statements regarding warrants are true? I. They pay dividends. II. They represent ownership in the issuing corporation. III. They allow for the purchase of common stock at a fixed price. IV. They do not give holders voting rights.

A) I and II

B) II and III

C) III and IV

D) II and IV

None

11.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Five years ago, a corporation issued a portion of its authorized shares. Those shares currently trade on the New York Stock Exchange. In an effort to reduce the number of shares outstanding, the issuer purchases 30 million shares from existing shareholders. The shares purchased by the issuer in the secondary market are now known as

A) treasury stock.

B) unissued stock.

C) authorized stock.

D) issued stock.

None

12.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

In order for an investor to be eligible to receive a previously declared cash dividend, the stock must be purchased

A) the day after the ex-dividend date.

B) before the ex-dividend date.

C) on the ex-dividend date.

D) the day before the record date.

None

13.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

All of the following are advantages of investing in American depositary receipts (ADRs) except

A) transactions are done in U.S. currency.

B) ADRs fall under the oversight of the SEC.

C) dividends are received in U.S. currency.

D) currency risk is virtually eliminated.

None

14.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Investors in all of the following securities could receive dividend payments that increase over time except

A) adjustable-rate preferred stock.

B) participating preferred stock.

C) cumulative preferred stock.

D) common stock.

None

15.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

The issuer of an American depositary receipt (ADR) is

A) a foreign branch of a foreign bank.

B) a domestic bank.

C) a foreign branch of a domestic bank.

D) a domestic branch of a foreign bank.

None

16.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Lambda Corporation has received a donation of 100,000 shares of its common stock from the spouse of the deceased founder of the company. This would appear on the company's books as

A) treasury stock.

B) unissued stock.

C) authorized, but unissued stock.

D) reacquired stock.

None

17.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Synapse Communication Corporation (SCC) is growing. To finance the expansion, the company has a $100 million debenture offering. Attached to the offering are five-year warrants to purchase SCC common shares. Each warrant allows for the purchase of one SCC share at a price of $53 per share. Three years after the issue date, SCC stock is trading at $63 per share. Each warrant has

A) no intrinsic value, only time value.

B) an intrinsic value of $5 per warrant.

C) an intrinsic value of $10 per warrant.

D) an intrinsic value of $20 per warrant.

None

18.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

In a 3-for-2 stock split, an investor will

A) have two-thirds fewer shares at a 50% higher price.

B) have 50% more shares at two-thirds the price.

C) have 50% more shares at half the price.

D) have 50% fewer shares at twice the price.

None

19.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

An investor owns 400 shares of ABC common stock. ABC's board of directors has declared a 5:4 stock split. As a result, the investor will receive how many additional shares?

A) 80 shares

B) 100 shares

C) 40 shares

D) 500 shares

None

20.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Marcus owns 5,000 shares of KYZ stock. He recently received proxies in the mail. Marcus would be able to use the proxies for all of the following except

A) to vote on a proposed 2:1 stock split.

B) to vote on the proposed issuance of 100,000 shares of convertible preferred stock.

C) to vote for three members of the board of directors.

D) to buy additional shares of KYZ common stock after the stock splits 2:1.

None

21.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

DJX Corporation's charter has authorized 10 million shares of common stock. It has issued 5 million shares and has 1 million shares in its treasury. How many shares of DJX common stock are authorized but unissued?

A) 6 million

B) 9 million

C) 4 million

D) 5 million

None

22.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

If all other factors are equal, an investor would expect which type of preferred stock to pay the highest stated dividend rate?

A) Cumulative

B) Convertible

C) Callable

D) Straight

None

23.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

As interest rates fall, prices of straight preferred stock will

A) become volatile.

B) remain unaffected.

C) rise.

D) fall.

None

24.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Corporations issue equity securities. One category of equity is preferred stock. A number of different adjectives can apply to preferred stock issues. All of the following are types of preferred stock except

A) convertible preferred.

B) participating preferred.

C) cumulative preferred.

D) straight cumulative preferred.

None

25.

SERIES 7, Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,Series 7

Preferred stock comes with many different options. What type of preferred stock would be most advantageous to the investor if the issuing company had strong revenue and earnings that exceeded industry estimates?

A) Callable preferred

B) Adjustable-rate

C) Participating

D) Cumulative

None

1 out of 25

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