CFIN COMPREHENSIVE EXAM SCRIPT
VERIFIED QUESTIONS AND SOLUTIONS
GRADED APLUS
●● Preferred stock dividends
Answer: can go without payment and pay in arrears the following year
●● Characteristics of common stock are
Answer: -voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
-variable returns
-unlimited earnings potential
-earnings are in dividends & the increase in price of stock
●● New start up ventures often issue
Answer: preferred stock (in an IPO)
●● What stock is considered a hybrid
Answer: preferred stock
,●● One thing common stock and preferred stock have in common is
Answer: both have no maturity date
●● Which type of security has voting rights
Answer: common stock
●● Debt covenants and restrictions help to ensure that
Answer: management is meeting bond and shareholder expectations
NOTE: covenants are promises meant to be kept
●● What is true regarding bonds
Answer: -when bond matures, bondholder gets lump sum back
-coupon rate doesn't change
-maturity is in years
-PAR value is typically $1000
-Future value (same as PAR) is typically $1000
●● Bond sells at face value when
Answer: required rate of return is equal to the coupon rate
●● Why are bonds the primary method for raising capital
, Answer: because bonds remove the intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of
banks underwriting the security issue
●● What type of bond can be traded for stock
Answer: convertible bonds
●● What is the interest rate for annual payments of a bond known as
Answer: the coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond
and will remain unchanged
●● Coupon rate is the established rate of the bond and should
Answer: never change
●● Debentures are
Answer: secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash,
secured against a company's assets and backed by credit, transferable by
the holder, and may also be unsecured
●● Secured loan
Answer: has collateral like a mortgage
VERIFIED QUESTIONS AND SOLUTIONS
GRADED APLUS
●● Preferred stock dividends
Answer: can go without payment and pay in arrears the following year
●● Characteristics of common stock are
Answer: -voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
-variable returns
-unlimited earnings potential
-earnings are in dividends & the increase in price of stock
●● New start up ventures often issue
Answer: preferred stock (in an IPO)
●● What stock is considered a hybrid
Answer: preferred stock
,●● One thing common stock and preferred stock have in common is
Answer: both have no maturity date
●● Which type of security has voting rights
Answer: common stock
●● Debt covenants and restrictions help to ensure that
Answer: management is meeting bond and shareholder expectations
NOTE: covenants are promises meant to be kept
●● What is true regarding bonds
Answer: -when bond matures, bondholder gets lump sum back
-coupon rate doesn't change
-maturity is in years
-PAR value is typically $1000
-Future value (same as PAR) is typically $1000
●● Bond sells at face value when
Answer: required rate of return is equal to the coupon rate
●● Why are bonds the primary method for raising capital
, Answer: because bonds remove the intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of
banks underwriting the security issue
●● What type of bond can be traded for stock
Answer: convertible bonds
●● What is the interest rate for annual payments of a bond known as
Answer: the coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond
and will remain unchanged
●● Coupon rate is the established rate of the bond and should
Answer: never change
●● Debentures are
Answer: secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash,
secured against a company's assets and backed by credit, transferable by
the holder, and may also be unsecured
●● Secured loan
Answer: has collateral like a mortgage
