FIN 3403 EXAM 2 QUESTIONS WITH
CORRECT ANSWERS
A company has two open seats, Seat A and Seat B, on its board of directors. There are
6 candidates vying for these 2 positions. There will be a single election to determine the
winner of both open seats. As the owner of 100 shares of stock, you will receive one
vote per share for each open seat. You decide to cast all 200 of your votes for a single
candidate. What is this type of voting called? - Answer- cumulative
You want to be on the board of directors of Wisely Foods. Since you are the only
shareholder that will vote for you, you will need to own more than half of the outstanding
shares of stock if you are to be elected to the board. What is the type of voting called
that requires this level of stock ownership to be successfully elected under these
conditions? - Answer- straight
You cannot attend the shareholder's meeting for Alpha United so you authorize another
shareholder to vote on your behalf. What is the granting of this authority called? -
Answer- voting by proxy
What are the distributions to shareholders by a corporation called? - Answer- dividends
Which one of the following is a type of equity security that has a fixed dividend and a
priority status over other equity securities? - Answer- preferred stock
Callander Enterprises stock is listed on NASDAQ. The firm is planning to issue some
new equity shares for sale to the general public. This sale will occur in which one of the
following markets? - Answer- primary
The secondary market is best defined by which one of the following? - Answer- market
where outstanding shares of stock are resold
An agent who maintains an inventory from which he or she buys and sells securities is
called a: - Answer- dealer.
An agent who arranges a transaction between a buyer and a seller of equity securities
is called a: - Answer- broker.
The owner of one of the 1,366 trading licenses for the NYSE is called a: - Answer-
member.
,The person on the floor of the NYSE who executes buy and sell orders on behalf of
customers is called a(n): - Answer- commission broker.
A market maker who acts as a dealer in one or more securities on the floor of the NYSE
is called a: - Answer- specialist.
A floor broker on the NYSE does which one of the following? - Answer- executes orders
on behalf of a commission broker
An individual on the floor of the NYSE who owns a trading license and buys and sells
for his or her personal account is called a: - Answer- floor trader.
Which one of the following is the electronic system used by the NYSE for directly
transmitting orders to specialists? - Answer- SuperDOT
The stream of customer orders coming in to the NYSE trading floor is called the: -
Answer- order flow.
The counter area on the floor of the NYSE where a specialist operates is called a: -
Answer- post.
A securities market primarily comprised of dealers who buy and sell for their own
inventories is referred to which type of market? - Answer- over-the-counter
An ECN is best described as: - Answer- a website that allows individual investors to
trade directly with one another.
Mary just purchased a bond which pays $60 a year in interest. What is this $60 called? -
Answer- coupon
Bert owns a bond that will pay him $75 each year in interest plus a $1,000 principal
payment at maturity. What is the $1,000 called? - Answer- face value
A bonds coupon rate is equal to the annual interest divided by which one of the
following? - Answer- face value
The specified date on which the principal amount of a bond is payable is referred to as
which one of the following? - Answer- maturity
Currently, the bond market requires a return of 11.6 percent on the 10-year bonds
issued by Winston Industries. The 11.6 percent is referred to as which one of the
following? - Answer- yield to maturity
The current yield is defined as the annual interest on a bond divided by which one of the
following? - Answer- Market price
, An indenture is: - Answer- the legal agreement between the bond issuer and the
bondholders
Atlas Entertainment has 15-year bonds outstanding. The interest payments on these
bonds are sent directly to each of the individual bondholders. These direct payments
are a clear indication that the bonds can accurately be defined as being issued: -
Answer- in registered form
A bond that is payable to whomever has physical possession of the bond is said to be
in: - Answer- bearer form
The Leeward Company just issued 15-year, 8 percent, unsecured bonds at par. These
bonds fit the definition of which one of the following terms? - Answer- debenture
Which of the following defines a note?
I. secured
II. unsecured
III. maturity less than 10 years
IV. maturity in excess of 10 years - Answer- II and III only
A sinking fund is managed by a trustee for which one of the following purposes? -
Answer- early bond redemption
A bond that can be paid off early at the issuer's discretion is referred to as being which
one of the following? - Answer- callable
A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030,
plus any accrued interest. The additional $30 is called which one of the following? -
Answer- call premium
A deferred call provision is which one of the following? - Answer- prohibition which
prevents bond issuers from redeeming callable bonds prior to a specified date
A call-protected bond is a bond that: - Answer- cannot be called during a certain period
of time.
The items included in an indenture that limit certain actions of the issuer in order to
protect bondholder's interests are referred to as the: - Answer- protective covenants.
A bond that has only one payment, which occurs at maturity, defines which one of the
following? - Answer- zero coupon
Which one of the following is the price a dealer will pay to purchase a bond? - Answer-
bid price
CORRECT ANSWERS
A company has two open seats, Seat A and Seat B, on its board of directors. There are
6 candidates vying for these 2 positions. There will be a single election to determine the
winner of both open seats. As the owner of 100 shares of stock, you will receive one
vote per share for each open seat. You decide to cast all 200 of your votes for a single
candidate. What is this type of voting called? - Answer- cumulative
You want to be on the board of directors of Wisely Foods. Since you are the only
shareholder that will vote for you, you will need to own more than half of the outstanding
shares of stock if you are to be elected to the board. What is the type of voting called
that requires this level of stock ownership to be successfully elected under these
conditions? - Answer- straight
You cannot attend the shareholder's meeting for Alpha United so you authorize another
shareholder to vote on your behalf. What is the granting of this authority called? -
Answer- voting by proxy
What are the distributions to shareholders by a corporation called? - Answer- dividends
Which one of the following is a type of equity security that has a fixed dividend and a
priority status over other equity securities? - Answer- preferred stock
Callander Enterprises stock is listed on NASDAQ. The firm is planning to issue some
new equity shares for sale to the general public. This sale will occur in which one of the
following markets? - Answer- primary
The secondary market is best defined by which one of the following? - Answer- market
where outstanding shares of stock are resold
An agent who maintains an inventory from which he or she buys and sells securities is
called a: - Answer- dealer.
An agent who arranges a transaction between a buyer and a seller of equity securities
is called a: - Answer- broker.
The owner of one of the 1,366 trading licenses for the NYSE is called a: - Answer-
member.
,The person on the floor of the NYSE who executes buy and sell orders on behalf of
customers is called a(n): - Answer- commission broker.
A market maker who acts as a dealer in one or more securities on the floor of the NYSE
is called a: - Answer- specialist.
A floor broker on the NYSE does which one of the following? - Answer- executes orders
on behalf of a commission broker
An individual on the floor of the NYSE who owns a trading license and buys and sells
for his or her personal account is called a: - Answer- floor trader.
Which one of the following is the electronic system used by the NYSE for directly
transmitting orders to specialists? - Answer- SuperDOT
The stream of customer orders coming in to the NYSE trading floor is called the: -
Answer- order flow.
The counter area on the floor of the NYSE where a specialist operates is called a: -
Answer- post.
A securities market primarily comprised of dealers who buy and sell for their own
inventories is referred to which type of market? - Answer- over-the-counter
An ECN is best described as: - Answer- a website that allows individual investors to
trade directly with one another.
Mary just purchased a bond which pays $60 a year in interest. What is this $60 called? -
Answer- coupon
Bert owns a bond that will pay him $75 each year in interest plus a $1,000 principal
payment at maturity. What is the $1,000 called? - Answer- face value
A bonds coupon rate is equal to the annual interest divided by which one of the
following? - Answer- face value
The specified date on which the principal amount of a bond is payable is referred to as
which one of the following? - Answer- maturity
Currently, the bond market requires a return of 11.6 percent on the 10-year bonds
issued by Winston Industries. The 11.6 percent is referred to as which one of the
following? - Answer- yield to maturity
The current yield is defined as the annual interest on a bond divided by which one of the
following? - Answer- Market price
, An indenture is: - Answer- the legal agreement between the bond issuer and the
bondholders
Atlas Entertainment has 15-year bonds outstanding. The interest payments on these
bonds are sent directly to each of the individual bondholders. These direct payments
are a clear indication that the bonds can accurately be defined as being issued: -
Answer- in registered form
A bond that is payable to whomever has physical possession of the bond is said to be
in: - Answer- bearer form
The Leeward Company just issued 15-year, 8 percent, unsecured bonds at par. These
bonds fit the definition of which one of the following terms? - Answer- debenture
Which of the following defines a note?
I. secured
II. unsecured
III. maturity less than 10 years
IV. maturity in excess of 10 years - Answer- II and III only
A sinking fund is managed by a trustee for which one of the following purposes? -
Answer- early bond redemption
A bond that can be paid off early at the issuer's discretion is referred to as being which
one of the following? - Answer- callable
A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030,
plus any accrued interest. The additional $30 is called which one of the following? -
Answer- call premium
A deferred call provision is which one of the following? - Answer- prohibition which
prevents bond issuers from redeeming callable bonds prior to a specified date
A call-protected bond is a bond that: - Answer- cannot be called during a certain period
of time.
The items included in an indenture that limit certain actions of the issuer in order to
protect bondholder's interests are referred to as the: - Answer- protective covenants.
A bond that has only one payment, which occurs at maturity, defines which one of the
following? - Answer- zero coupon
Which one of the following is the price a dealer will pay to purchase a bond? - Answer-
bid price
