Series 7 unit 1 equity securities
Exam 2025 Questions and Answers
Which of the following have equity positions in a corporation?
Common stockholders.
Preferred stockholders.
Convertible bondholders.
Mortgage bondholders.
A) I and II.
B) I and III.
C) II and IV.
D) III and IV. - ANSWER✔✔-Answer: A
Common and preferred stockholders have equity, or ownership positions. Bondholders
(mortgage or otherwise) are creditors, not owners.
A customer owns 1,000 shares of ABC corporation. Which of the following actions on
the part of ABC would dilute her equity?
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
,A) 2-1 stock split.
B) Registered primary offering of shares.
C) Registered secondary offering of shares.
D) Payment of a 10% stock dividend. - ANSWER✔✔-Answer: B
An additional primary issue of shares would dilute a present shareholder's ownership,
unless she personally purchases a portion of the new shares (as in a rights offering). In a
secondary offering, ownership of existing outstanding shares is simply changing hands.
With a stock dividend or stock split, percent equity does not change.
An informal network of market makers that offers to trade securities NOT listed on an
exchange is called:
A) National Daily Quotation Service.
B) National Association of Securities Dealers Automated Quotations.
C) the over-the-counter market.
D) Archipelago Exchange (ArcaEx). - ANSWER✔✔-Answer: C
This best describes the over-the-counter market which is an interdealer market linked
by computer terminals to Financial Industry Regulatory Authority (FINRA) member
firms across the country.
Common stockholders of a publicly traded corporation have which of the following
rights and privileges?
Residual claim to assets at dissolution.
Right to a vote for stock dividends to be paid.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
,Right to receive an audited financial report on an annual basis.
Claim against dividends in default.
A) I and IV.
B) II and III.
C) II and IV.
D) I and III. - ANSWER✔✔-Answer: D
Common stockholders of publicly traded companies have a residual claim to assets of a
corporation at dissolution and are entitled to receive an annual report containing
audited financial statements. Stockholders never get to vote on dividends.
A client has 100 shares of GHI when the stock undergoes a split. After the split, the
client has:
A) a proportionately increased interest in the company.
B) greater exposure.
C) no effective change in the value of the position.
D) a proportionately decreased interest in the company. - ANSWER✔✔-Answer: C
When a stock splits, the number of shares each stockholder has either increases or
decreases (in the case of a reverse split). The customer experiences no effective change
in position because the proportionate interest in the company remains the same.
After a company splits its stock 2 for 1, an investor who owns 100 shares receives:
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 3
, A) another certificate for 100 shares.
B) another certificate for 200 shares.
C) notice that the invA 2-1 split does which of the following? - ANSWER✔✔-After a 2
for 1 split, the transfer agent will send the investor another certificate for 100 shares. The
investor is not required to return the existing stock certificate.
A 2-1 split does which of the following?
Increases the number of outstanding shares.
Decreases retained earnings.
Decreases par value per share.
A) I, II and III.
B) I and III.
C) I and II.
D) II and III. - ANSWER✔✔-Answer: B
After a 2-1 stock split, the number of outstanding shares doubles and the par value per
share decreases by half. Retained earnings are not affected.
If a stock undergoes a 1-5 reverse split, which of the following increases?
Market price per share.
Number of shares outstanding.
Earnings per share.
Market capitalization of the company.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 4
Exam 2025 Questions and Answers
Which of the following have equity positions in a corporation?
Common stockholders.
Preferred stockholders.
Convertible bondholders.
Mortgage bondholders.
A) I and II.
B) I and III.
C) II and IV.
D) III and IV. - ANSWER✔✔-Answer: A
Common and preferred stockholders have equity, or ownership positions. Bondholders
(mortgage or otherwise) are creditors, not owners.
A customer owns 1,000 shares of ABC corporation. Which of the following actions on
the part of ABC would dilute her equity?
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
,A) 2-1 stock split.
B) Registered primary offering of shares.
C) Registered secondary offering of shares.
D) Payment of a 10% stock dividend. - ANSWER✔✔-Answer: B
An additional primary issue of shares would dilute a present shareholder's ownership,
unless she personally purchases a portion of the new shares (as in a rights offering). In a
secondary offering, ownership of existing outstanding shares is simply changing hands.
With a stock dividend or stock split, percent equity does not change.
An informal network of market makers that offers to trade securities NOT listed on an
exchange is called:
A) National Daily Quotation Service.
B) National Association of Securities Dealers Automated Quotations.
C) the over-the-counter market.
D) Archipelago Exchange (ArcaEx). - ANSWER✔✔-Answer: C
This best describes the over-the-counter market which is an interdealer market linked
by computer terminals to Financial Industry Regulatory Authority (FINRA) member
firms across the country.
Common stockholders of a publicly traded corporation have which of the following
rights and privileges?
Residual claim to assets at dissolution.
Right to a vote for stock dividends to be paid.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
,Right to receive an audited financial report on an annual basis.
Claim against dividends in default.
A) I and IV.
B) II and III.
C) II and IV.
D) I and III. - ANSWER✔✔-Answer: D
Common stockholders of publicly traded companies have a residual claim to assets of a
corporation at dissolution and are entitled to receive an annual report containing
audited financial statements. Stockholders never get to vote on dividends.
A client has 100 shares of GHI when the stock undergoes a split. After the split, the
client has:
A) a proportionately increased interest in the company.
B) greater exposure.
C) no effective change in the value of the position.
D) a proportionately decreased interest in the company. - ANSWER✔✔-Answer: C
When a stock splits, the number of shares each stockholder has either increases or
decreases (in the case of a reverse split). The customer experiences no effective change
in position because the proportionate interest in the company remains the same.
After a company splits its stock 2 for 1, an investor who owns 100 shares receives:
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 3
, A) another certificate for 100 shares.
B) another certificate for 200 shares.
C) notice that the invA 2-1 split does which of the following? - ANSWER✔✔-After a 2
for 1 split, the transfer agent will send the investor another certificate for 100 shares. The
investor is not required to return the existing stock certificate.
A 2-1 split does which of the following?
Increases the number of outstanding shares.
Decreases retained earnings.
Decreases par value per share.
A) I, II and III.
B) I and III.
C) I and II.
D) II and III. - ANSWER✔✔-Answer: B
After a 2-1 stock split, the number of outstanding shares doubles and the par value per
share decreases by half. Retained earnings are not affected.
If a stock undergoes a 1-5 reverse split, which of the following increases?
Market price per share.
Number of shares outstanding.
Earnings per share.
Market capitalization of the company.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 4
