SIE UNIT 2- UNDERSTANDING
PRODUCTS AND THEIR RISKS EXAM
QUESTIONS & ANSWERS PASSED
ALREADY GRADED A+
Stockholder rights, growth, income, limited liability CORRECT ANSWER - Benefits of owning
common stock.
voting, sell, give, access, books, statements, year, preemptive, proportionate CORRECT ANSWER
- Rights of common stockholders:
- _____ rights.
- the right to _____ or _____ away shares without permission of the corporation.
- right to limited _____ of corporate _____.
- right to receive an audited set of financial _____ of the company's performance each _____.
- _____ rights. The right to maintain _____ share of ownership in the corporation.
Proxy CORRECT ANSWER - An absentee ballot that is made available for those shareholders
who want to vote but can't attend the shareholder meeting.
Preemptive (Rights) CORRECT ANSWER - The right for common stockholders to maintain their
proportionate share of ownership in the corporation when additional shares are issued.
,dividends CORRECT ANSWER - Many corporations pay regular quarterly cash/stock/property
_____ to stockholders.
BOD(Board of Directors), guaranteed CORRECT ANSWER - Dividends are declared by the ___.
They may increase over time as profitability increases, but they are also not _____.
Limited Liability CORRECT ANSWER - One of the most important features of equity ownership -
In the event of a corporation's bankruptcy, personal assets of stockholders are not at risk.
invested CORRECT ANSWER - Shareholders are personally at risk only for the amount that was
_____.
Market risk, decreased dividend income, low priority at dissolution CORRECT ANSWER - Risks of
owning common stock.
Market Risk CORRECT ANSWER - The chance that a stock will decline in price.
decreasing, ceasing CORRECT ANSWER - A risk of stock ownership is the possibility of dividend
income _____ or _____ entirely if the company loses money.
lowest CORRECT ANSWER - Common stockholders have the _____ priority at dissolution.
Reorganization CORRECT ANSWER - Type of bankruptcy in which the entity will likely be able to
retain property and continue doing business but must repay some or all of its existing debts
within a specified time frame.
Liquidation CORRECT ANSWER - Type of bankruptcy in which keeping property or continuing
business will not occur and all property will be taken and sold to repay all debts.
,Unpaid wages, taxes, secured debt, unsecured debt, subordinated debt, preferred stockholders,
common stockholders CORRECT ANSWER - The priority of claims in the event of liquidation.
preferred, fixed CORRECT ANSWER - Although _____ stock is an equity security, it has some
characteristics of debt securities. The rate of return is _____ rather than variable.
dividend, 100 CORRECT ANSWER - Normally a preferred stock is identified by its annual _____
payment stated as a percentage of its par value. Always assume par value is $__ unless stated
differently.
voting, preemptive CORRECT ANSWER - Preferred stockholders do not have _____ or _____
rights.
common, preferred CORRECT ANSWER - All corporations issue _____ stock but not all
corporations issue _____ stock.
Dividend preference, priority over common stock at dissolution CORRECT ANSWER - Benefits of
owning preferred stock.
preferred, common CORRECT ANSWER - When the BOD declares dividends, owners of _____
shares must be paid prior to any payment to _____ shareholders.
Purchasing power risk, interest rate sensitivity, decreased dividend income, low priority at
dissolution CORRECT ANSWER - Risks of owning preferred stock.
Purchasing Power Risk CORRECT ANSWER - The potential that, because of inflation, the fixed
income produced will not purchase as much in the future as it does today.
, rise CORRECT ANSWER - Like a fixed income security, when interest rates _____, the value of
preferred shares declines.
before, after CORRECT ANSWER - While preferred shareholders are paid _____ common
stockholders at dissolution, they are paid _____ all creditors.
Straight (Noncumulative) CORRECT ANSWER - Type of preferred stock. Nas no special features
beyond the stated dividend payment. Missed dividends are not paid to the holder.
Cumulative CORRECT ANSWER - Type of preferred stock. Accrues dividend payments due to
shareholders in the event dividends are reduced or suspended. When dividend payments are
resumed, the dividends in arrears must be paid to the shareholders along with current
dividends.
Dividends in Arrears CORRECT ANSWER - The total accumulated dividends that must be paid to
preferred stockholders in the event a corporation suspended or reduced dividend payments.
Callable CORRECT ANSWER - Type of preferred stock. The company can buy back from investors
at a stated price after a specified date.
premium, par CORRECT ANSWER - When a corporation calls a preferred stock, they may, in
return, pay a _____ exceeding the stock's _____ value at the call.
Convertible CORRECT ANSWER - Type of preferred stock. The owner can exchange the shares
for a fixed number of shares of the issuing corporation's common stock.
lower, common CORRECT ANSWER - Convertible preferred is generally issued with a _____
stated dividend rate than nonconvertible because the investor may have the opportunity to
convert to _____ shares and achieve greater capital gain.
PRODUCTS AND THEIR RISKS EXAM
QUESTIONS & ANSWERS PASSED
ALREADY GRADED A+
Stockholder rights, growth, income, limited liability CORRECT ANSWER - Benefits of owning
common stock.
voting, sell, give, access, books, statements, year, preemptive, proportionate CORRECT ANSWER
- Rights of common stockholders:
- _____ rights.
- the right to _____ or _____ away shares without permission of the corporation.
- right to limited _____ of corporate _____.
- right to receive an audited set of financial _____ of the company's performance each _____.
- _____ rights. The right to maintain _____ share of ownership in the corporation.
Proxy CORRECT ANSWER - An absentee ballot that is made available for those shareholders
who want to vote but can't attend the shareholder meeting.
Preemptive (Rights) CORRECT ANSWER - The right for common stockholders to maintain their
proportionate share of ownership in the corporation when additional shares are issued.
,dividends CORRECT ANSWER - Many corporations pay regular quarterly cash/stock/property
_____ to stockholders.
BOD(Board of Directors), guaranteed CORRECT ANSWER - Dividends are declared by the ___.
They may increase over time as profitability increases, but they are also not _____.
Limited Liability CORRECT ANSWER - One of the most important features of equity ownership -
In the event of a corporation's bankruptcy, personal assets of stockholders are not at risk.
invested CORRECT ANSWER - Shareholders are personally at risk only for the amount that was
_____.
Market risk, decreased dividend income, low priority at dissolution CORRECT ANSWER - Risks of
owning common stock.
Market Risk CORRECT ANSWER - The chance that a stock will decline in price.
decreasing, ceasing CORRECT ANSWER - A risk of stock ownership is the possibility of dividend
income _____ or _____ entirely if the company loses money.
lowest CORRECT ANSWER - Common stockholders have the _____ priority at dissolution.
Reorganization CORRECT ANSWER - Type of bankruptcy in which the entity will likely be able to
retain property and continue doing business but must repay some or all of its existing debts
within a specified time frame.
Liquidation CORRECT ANSWER - Type of bankruptcy in which keeping property or continuing
business will not occur and all property will be taken and sold to repay all debts.
,Unpaid wages, taxes, secured debt, unsecured debt, subordinated debt, preferred stockholders,
common stockholders CORRECT ANSWER - The priority of claims in the event of liquidation.
preferred, fixed CORRECT ANSWER - Although _____ stock is an equity security, it has some
characteristics of debt securities. The rate of return is _____ rather than variable.
dividend, 100 CORRECT ANSWER - Normally a preferred stock is identified by its annual _____
payment stated as a percentage of its par value. Always assume par value is $__ unless stated
differently.
voting, preemptive CORRECT ANSWER - Preferred stockholders do not have _____ or _____
rights.
common, preferred CORRECT ANSWER - All corporations issue _____ stock but not all
corporations issue _____ stock.
Dividend preference, priority over common stock at dissolution CORRECT ANSWER - Benefits of
owning preferred stock.
preferred, common CORRECT ANSWER - When the BOD declares dividends, owners of _____
shares must be paid prior to any payment to _____ shareholders.
Purchasing power risk, interest rate sensitivity, decreased dividend income, low priority at
dissolution CORRECT ANSWER - Risks of owning preferred stock.
Purchasing Power Risk CORRECT ANSWER - The potential that, because of inflation, the fixed
income produced will not purchase as much in the future as it does today.
, rise CORRECT ANSWER - Like a fixed income security, when interest rates _____, the value of
preferred shares declines.
before, after CORRECT ANSWER - While preferred shareholders are paid _____ common
stockholders at dissolution, they are paid _____ all creditors.
Straight (Noncumulative) CORRECT ANSWER - Type of preferred stock. Nas no special features
beyond the stated dividend payment. Missed dividends are not paid to the holder.
Cumulative CORRECT ANSWER - Type of preferred stock. Accrues dividend payments due to
shareholders in the event dividends are reduced or suspended. When dividend payments are
resumed, the dividends in arrears must be paid to the shareholders along with current
dividends.
Dividends in Arrears CORRECT ANSWER - The total accumulated dividends that must be paid to
preferred stockholders in the event a corporation suspended or reduced dividend payments.
Callable CORRECT ANSWER - Type of preferred stock. The company can buy back from investors
at a stated price after a specified date.
premium, par CORRECT ANSWER - When a corporation calls a preferred stock, they may, in
return, pay a _____ exceeding the stock's _____ value at the call.
Convertible CORRECT ANSWER - Type of preferred stock. The owner can exchange the shares
for a fixed number of shares of the issuing corporation's common stock.
lower, common CORRECT ANSWER - Convertible preferred is generally issued with a _____
stated dividend rate than nonconvertible because the investor may have the opportunity to
convert to _____ shares and achieve greater capital gain.
