FINRA STUDY EXAM WITH CORRECT ANSWERS

FINRA STUDY EXAM WITH CORRECT
ANSWERS



If interest Rates fall the issuer will most likely call which bonds first
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? - CORRECT ANSWER-
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High Dividend Rate preferred issues trading at a premium
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What are some actions by a corporation will affect an individuals c
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ommon shareholder's equity - CORRECT ANSWER-
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Conversion of convertible preferred stocks or bond k k k k k k


Repurchase of common shares k k k k


Issuance of additional common shares k k k k k




(Stock splits do not effect shareholders equity but it must be voted
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kon because it effects Par Value)
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Benefits to a Convertible stock compared to a regular debenture -
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CORRECT ANSWER-
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Convertible stock will have a slightly lower yield than non- k k k k k k k k k


convertible however it will raise in value as the market price of co
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mmon stock rises k k




What traits do preferred stock and bonds have in common? How
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are they different? - CORRECT ANSWER-
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Can be callable by issuer, both have periodic payments. Both are
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senior securities to common stock.
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Neither have voting rights k k k


Preferred is paid dividends on a percentage of face value much li
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ke the yield of a bond.
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Preferred stock has no maturity date and can be held perpetually
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while bonds have a set maturity date.
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,Payments to preferred stock are not mandatory unless a declared
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dividend has been issued to common stock
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Payments to bond holders are mandatory k k k k k




When are common dividends declared and paid? -
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CORRECT ANSWER-Quarterly for both
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A customer owns 256 shares of ABC common stock. ABC declar
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es a rights offering, with the terms being that for every 15 rights a
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shareholder may purchase one additional share.at $24 a share. A
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ny fractional rights may be rounded up to buy an additional share.
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k

How many shares may the customer buy with these right? -
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CORRECT ANSWER-
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A share holder can buy a maximum of 18 shares with these rights
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paying $432 for them. k k k k




The 17.06 shares may be rounded up to 18.
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XXYZ ADR (American Depository Receipt) represents 10% of th
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e value of an XXYZ ordinary share. The ordinary shares trade on t
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he London Stock Exchange, where the current price is 400 British
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Pounds (BP). The current exchange rate for the British Pound ag
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ainst the US Dollar is $1.40. The ordinary share pays an annualiz
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ed dividend of 12 BP. The XXYZ ADR is listed on the NYSE. If a c
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ustomer places an order to buy $560,000 of the ADR on the custo
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mer will buy how many shares of the ADR? -
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CORRECT ANSWER-10,000 Shares with $560.,000
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Explanation k




400 BP x $1.4 = 560
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$560, BP/share = 10,000 Shares of XXYZ
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Preferred Stock market valuation is based primarily on what?
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Performance of stock? k k


Inflation?

, Interest rates? - CORRECT ANSWER- k k k k


Interest Rates is the correct answer, remember that preferred sto
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ck is much like a bond in that it has fixed payments and is conside
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red fixed income.
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Long term market interest rate levels determine the valuation.
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Rights are? - CORRECT ANSWER- k k k k


Exerciserable, Negotiable (can be traded), Giftable k k k k k




Dividends can be paid in the form of? - CORRECT ANSWER- k k k k k k k k k k


Cash or products k k k


Additional shares of ANOTHER company (yes another company)
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k

Additional shares of that company k k k k k




NOT Options and Not Tax deferments
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Preferred Stock is? - CORRECT ANSWER- k k k k k


Performance based, participating, cumulative (dividends) k k k k k




It is not refundable or redeemable
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A corporate bond which is backed solely by full faith and credit of t
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he issuer.. - CORRECT ANSWER-Debenture
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Trades of all of the following will settle in Fed Funds Except?
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1) US Treasury Bonds
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2) Treasury Bills
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3) Prime Commercial Paper
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4) Prime Banker's Acceptances - CORRECT ANSWER-
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3) Prime commercial paper is not traded by the Federal Reserve t
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herefore does not settle in Fed Funds k k k k k k




Prime Banker's Acceptances, T Bills, T Bonds, are all settled in F
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ed Funds k