FINRA SIE Exam 2024 Questions &
Answers 100% Correct!!
If interest Rates fall the issuer will most likely call which bonds first? - ANSWERHigh Dividend Rate
preferred issues trading at a premium
What are some actions by a corporation will affect an individuals common shareholder's equity -
ANSWERConversion of convertible preferred stocks or bond
Repurchase of common shares
Issuance of additional common shares
(Stock splits do not effect shareholders equity but it must be voted on because it effects Par Value)
Benefits to a Convertible stock compared to a regular debenture - ANSWERConvertible stock will
have a slightly lower yield than non-convertible however it will raise in value as the market price of
common stock rises
What traits do preferred stock and bonds have in common? How are they different? - ANSWERCan
be callable by issuer, both have periodic payments. Both are senior securities to common stock.
Neither have voting rights
Preferred is paid dividends on a percentage of face value much like the yield of a bond.
Preferred stock has no maturity date and can be held perpetually while bonds have a set maturity
date.
Payments to preferred stock are not mandatory unless a declared dividend has been issued to
common stock
Payments to bond holders are mandatory
When are common dividends declared and paid? - ANSWERQuarterly for both
A customer owns 256 shares of ABC common stock. ABC declares a rights offering, with the terms
being that for every 15 rights a shareholder may purchase one additional share.at $24 a share. Any
fractional rights may be rounded up to buy an additional share.
,How many shares may the customer buy with these right? - ANSWERA share holder can buy a
maximum of 18 shares with these rights paying $432 for them.
The 17.06 shares may be rounded up to 18.
XXYZ ADR (American Depository Receipt) represents 10% of the value of an XXYZ ordinary share. The
ordinary shares trade on the London Stock Exchange, where the current price is 400 British Pounds
(BP). The current exchange rate for the British Pound against the US Dollar is $1.40. The ordinary
share pays an annualized dividend of 12 BP. The XXYZ ADR is listed on the NYSE. If a customer places
an order to buy $560,000 of the ADR on the customer will buy how many shares of the ADR? -
ANSWER10,000 Shares with $560.,000
Explanation
400 BP x $1.4 = 560
$560, BP/share = 10,000 Shares of XXYZ
Preferred Stock market valuation is based primarily on what?
Performance of stock?
Inflation?
Prime Banker's Acceptances, T Bills, T Bonds, are all settled in Fed Funds
All of the following are sources of income that can be used to service debt on municipal revenue
bonds Except?
1) Toll Fees
2) Park Fees
3) Capitalized interest
4) Sales Tax - ANSWERCapitalized interest (property tax) is not used in revenue bonds, it is only used
in General Obligation Bonds
, A corporation issued a 7% AA sinking fund debenture at par. Three years later, similar issues are
being issues at 8%. Which of the following is true about the outstanding 7% issue? How does the
current yield relate to the nominal yield - ANSWERThe current yield will be higher than the nominal
yield.
The nominal yield (stated yield) will be 7%
The market price of the yield will drop when the new issues are at a higher yield.
Current yield = annual interest $/ current market price
market price = .07 / .08 = 875
Current yield =
Current yield = .08
Current yield > Nominal
How would you quote a US Government bond with a dollar price of
$1012.50? - ANSWER101-8
US GOVT bonds are quoted on a percentage of par at 1/32nds
101 + 8/32 = 101.25 then multiply by 10x to get to par
$1012.50
Interest rates? - ANSWERInterest Rates is the correct answer, remember that preferred stock is much
like a bond in that it has fixed payments and is considered fixed income.
Long term market interest rate levels determine the valuation.
Answers 100% Correct!!
If interest Rates fall the issuer will most likely call which bonds first? - ANSWERHigh Dividend Rate
preferred issues trading at a premium
What are some actions by a corporation will affect an individuals common shareholder's equity -
ANSWERConversion of convertible preferred stocks or bond
Repurchase of common shares
Issuance of additional common shares
(Stock splits do not effect shareholders equity but it must be voted on because it effects Par Value)
Benefits to a Convertible stock compared to a regular debenture - ANSWERConvertible stock will
have a slightly lower yield than non-convertible however it will raise in value as the market price of
common stock rises
What traits do preferred stock and bonds have in common? How are they different? - ANSWERCan
be callable by issuer, both have periodic payments. Both are senior securities to common stock.
Neither have voting rights
Preferred is paid dividends on a percentage of face value much like the yield of a bond.
Preferred stock has no maturity date and can be held perpetually while bonds have a set maturity
date.
Payments to preferred stock are not mandatory unless a declared dividend has been issued to
common stock
Payments to bond holders are mandatory
When are common dividends declared and paid? - ANSWERQuarterly for both
A customer owns 256 shares of ABC common stock. ABC declares a rights offering, with the terms
being that for every 15 rights a shareholder may purchase one additional share.at $24 a share. Any
fractional rights may be rounded up to buy an additional share.
,How many shares may the customer buy with these right? - ANSWERA share holder can buy a
maximum of 18 shares with these rights paying $432 for them.
The 17.06 shares may be rounded up to 18.
XXYZ ADR (American Depository Receipt) represents 10% of the value of an XXYZ ordinary share. The
ordinary shares trade on the London Stock Exchange, where the current price is 400 British Pounds
(BP). The current exchange rate for the British Pound against the US Dollar is $1.40. The ordinary
share pays an annualized dividend of 12 BP. The XXYZ ADR is listed on the NYSE. If a customer places
an order to buy $560,000 of the ADR on the customer will buy how many shares of the ADR? -
ANSWER10,000 Shares with $560.,000
Explanation
400 BP x $1.4 = 560
$560, BP/share = 10,000 Shares of XXYZ
Preferred Stock market valuation is based primarily on what?
Performance of stock?
Inflation?
Prime Banker's Acceptances, T Bills, T Bonds, are all settled in Fed Funds
All of the following are sources of income that can be used to service debt on municipal revenue
bonds Except?
1) Toll Fees
2) Park Fees
3) Capitalized interest
4) Sales Tax - ANSWERCapitalized interest (property tax) is not used in revenue bonds, it is only used
in General Obligation Bonds
, A corporation issued a 7% AA sinking fund debenture at par. Three years later, similar issues are
being issues at 8%. Which of the following is true about the outstanding 7% issue? How does the
current yield relate to the nominal yield - ANSWERThe current yield will be higher than the nominal
yield.
The nominal yield (stated yield) will be 7%
The market price of the yield will drop when the new issues are at a higher yield.
Current yield = annual interest $/ current market price
market price = .07 / .08 = 875
Current yield =
Current yield = .08
Current yield > Nominal
How would you quote a US Government bond with a dollar price of
$1012.50? - ANSWER101-8
US GOVT bonds are quoted on a percentage of par at 1/32nds
101 + 8/32 = 101.25 then multiply by 10x to get to par
$1012.50
Interest rates? - ANSWERInterest Rates is the correct answer, remember that preferred stock is much
like a bond in that it has fixed payments and is considered fixed income.
Long term market interest rate levels determine the valuation.
