Series 7: Equity Securities UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Equity Securities: Authorized (3) - CORRECT ANSWER - (1) The maximum number of
shares a company can issue. (2) Specified initially in the company charter, but can be changed
with shareholder approval. (3) Generally, more shares are authorized than issued for flexibility to
issue more later.
Equity Securities: Issued (2) - CORRECT ANSWER - (1) Total number of of a company's
shares that have been sold and are held by shareholders. (2) Can be held by both insiders and the
general public.
Equity Securities: Outstanding - CORRECT ANSWER - The shares of a corporation's
stock that have been issued into the hands of the public.
Equity Securities: Treasury Stock (4) - CORRECT ANSWER - (1) Stock reacquired by a
corporation to be retired or resold to the public. (2) Treasury stock is issued but not outstanding,
and (3) is not taken into consideration when calculating earnings per share or dividends (4) or for
voting purposes.
Equity Securities: No Par Value (2) - CORRECT ANSWER - (1) Stock issued without the
specified par value indicated in the company's articles of incorporation or on the stock certificate
itself. (2) Most shares are classified as no-par value today as prices are determined by what
investors are willing to pay.
Equity Securities: Par Value (3) - CORRECT ANSWER - (1) The dollar amount assigned
to a security by the issuer. (2) For equity securities, par value is usually a very small amount that
bears no relationship to its market price, (3) except for preferred stock where par value is used to
calculate dividend payment.
, Equity Securities: Limited Liability (2) - CORRECT ANSWER - (1) Type of investment in
which a partner or investor cannot lose more than the amount invested. (2) Thus, the investor
bears no personal responsibility for a company's liabilities.
Equity Securities: Stock Certificate - CORRECT ANSWER - A document reflecting legal
ownership of a specific number of share in a corporation.
Equity Securities: Escrow Receipt (3) - CORRECT ANSWER - (1) A certificate
guaranteeing the securities underlying an option contract are on deposit, and (2) will be delivered
when the option's exercised. (3) Issued by the bank holding the underlying securities.
Equity Securities: Transfer Agent (2) - CORRECT ANSWER - (1) An agent, employed by
a corporation or mutual fund, to maintain shareholder records, (2) including purchases, sales, and
account balances.
Equity Securities: Registrar (2) - CORRECT ANSWER - (1) The organization, usually a
bank or trust company, that maintains a registry of the share owners and number of shares held
for a mutual fund, bond, or stock, and (2) ensures that no more shares than authorized are issued.
Equity Securities: Endorsements - CORRECT ANSWER - A signature used to legally
transfer a negotiable instrument, like bearer securities.
Equity Securities: Transfer Procedures (2) - CORRECT ANSWER - (1) Bearer securities
are transferred by endorsement or physical delivery of the instrument. (2) Registered securities
are transferred when the registrar amends the registry.
Common Stock: Definition (2) - CORRECT ANSWER - (1) Securities representing
ownership in a corporation. (2) Used by corporations to raise business capital.
Common Stock: Rights of Common Stockholders (5) - CORRECT ANSWER - (1) A share
of the company's success through pro rata share of dividends or capital appreciation. (2) A
company's assets during liquidation after bondholders, debt holders, and preferred stockholders.
ACTUAL Exam Questions and CORRECT
Answers
Equity Securities: Authorized (3) - CORRECT ANSWER - (1) The maximum number of
shares a company can issue. (2) Specified initially in the company charter, but can be changed
with shareholder approval. (3) Generally, more shares are authorized than issued for flexibility to
issue more later.
Equity Securities: Issued (2) - CORRECT ANSWER - (1) Total number of of a company's
shares that have been sold and are held by shareholders. (2) Can be held by both insiders and the
general public.
Equity Securities: Outstanding - CORRECT ANSWER - The shares of a corporation's
stock that have been issued into the hands of the public.
Equity Securities: Treasury Stock (4) - CORRECT ANSWER - (1) Stock reacquired by a
corporation to be retired or resold to the public. (2) Treasury stock is issued but not outstanding,
and (3) is not taken into consideration when calculating earnings per share or dividends (4) or for
voting purposes.
Equity Securities: No Par Value (2) - CORRECT ANSWER - (1) Stock issued without the
specified par value indicated in the company's articles of incorporation or on the stock certificate
itself. (2) Most shares are classified as no-par value today as prices are determined by what
investors are willing to pay.
Equity Securities: Par Value (3) - CORRECT ANSWER - (1) The dollar amount assigned
to a security by the issuer. (2) For equity securities, par value is usually a very small amount that
bears no relationship to its market price, (3) except for preferred stock where par value is used to
calculate dividend payment.
, Equity Securities: Limited Liability (2) - CORRECT ANSWER - (1) Type of investment in
which a partner or investor cannot lose more than the amount invested. (2) Thus, the investor
bears no personal responsibility for a company's liabilities.
Equity Securities: Stock Certificate - CORRECT ANSWER - A document reflecting legal
ownership of a specific number of share in a corporation.
Equity Securities: Escrow Receipt (3) - CORRECT ANSWER - (1) A certificate
guaranteeing the securities underlying an option contract are on deposit, and (2) will be delivered
when the option's exercised. (3) Issued by the bank holding the underlying securities.
Equity Securities: Transfer Agent (2) - CORRECT ANSWER - (1) An agent, employed by
a corporation or mutual fund, to maintain shareholder records, (2) including purchases, sales, and
account balances.
Equity Securities: Registrar (2) - CORRECT ANSWER - (1) The organization, usually a
bank or trust company, that maintains a registry of the share owners and number of shares held
for a mutual fund, bond, or stock, and (2) ensures that no more shares than authorized are issued.
Equity Securities: Endorsements - CORRECT ANSWER - A signature used to legally
transfer a negotiable instrument, like bearer securities.
Equity Securities: Transfer Procedures (2) - CORRECT ANSWER - (1) Bearer securities
are transferred by endorsement or physical delivery of the instrument. (2) Registered securities
are transferred when the registrar amends the registry.
Common Stock: Definition (2) - CORRECT ANSWER - (1) Securities representing
ownership in a corporation. (2) Used by corporations to raise business capital.
Common Stock: Rights of Common Stockholders (5) - CORRECT ANSWER - (1) A share
of the company's success through pro rata share of dividends or capital appreciation. (2) A
company's assets during liquidation after bondholders, debt holders, and preferred stockholders.
