SERIES 7 CHAPTER 1 EXAM 2025
QUESTIONS AND ANSWERS
A corporate stockholder has a "residual claim". This refers to the stockholder's right to: -
ANSWER✔✔-Corporate assets remaining at dissolution after the satisfaction of senior
obligations
Mr. Smith is short 100 shares of ABC common stock when ABC pays a 10% stock
dividend. On the morning of the ex-date Mr. Smith would - ANSWER✔✔-owe 10
additional shares of ABC common stock
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ABC Corp. has declared a cash dividend to owners of record July 17. The last date for
the customer to buy the stock and still receive the dividend is: - ANSWER✔✔-July 12
EXPLANATION
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, Using the month of July calendar, you would count back 2 business days from July 17,
which tells you the ex-date is July 13, therefore to receive the dividend the investor
would have to own the stock the day before ex-date or July 12th.
Which of the following companies is most likely to pay a stock dividend? -
ANSWER✔✔-A company with a small cash balance and earnings growing at 20% per
year
EXPLANATION
A company with a small cash balance would be the company most likely to pay a stock
(shares of stock) dividend.
An issuer would most likely call in its preferred stock when: - ANSWER✔✔-interest
rates are falling
EXPLANATION
Issuers would most likely call in an outstanding preferred or bond when interest rates
are falling because they could issue new securities with a lower dividend or interest rate
and reduce their expenses.
Which of the following are true of warrants? - ANSWER✔✔-The market price of the
stock is below the exercise price when they are issued.
EXPLANATION
Because warrants are used as an incentive or "sweetener," the exercise price of the
warrant will be more than the offering price of the new issue. As time passes and the
market price of the new issue rises, the warrant will become valuable.
Which of the following items would be used to calculate the Current Yield on common
stock? - ANSWER✔✔-Current market value of common stock
Annual dividend on common stock
EXPLANATION
The Current Yield formula is:
Annual Dividend divided by
Market Value of Common Stock
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
QUESTIONS AND ANSWERS
A corporate stockholder has a "residual claim". This refers to the stockholder's right to: -
ANSWER✔✔-Corporate assets remaining at dissolution after the satisfaction of senior
obligations
Mr. Smith is short 100 shares of ABC common stock when ABC pays a 10% stock
dividend. On the morning of the ex-date Mr. Smith would - ANSWER✔✔-owe 10
additional shares of ABC common stock
July
Sun. Mon. Tues. Wed. Thur. Fri. Sat.
1234567
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31
ABC Corp. has declared a cash dividend to owners of record July 17. The last date for
the customer to buy the stock and still receive the dividend is: - ANSWER✔✔-July 12
EXPLANATION
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, Using the month of July calendar, you would count back 2 business days from July 17,
which tells you the ex-date is July 13, therefore to receive the dividend the investor
would have to own the stock the day before ex-date or July 12th.
Which of the following companies is most likely to pay a stock dividend? -
ANSWER✔✔-A company with a small cash balance and earnings growing at 20% per
year
EXPLANATION
A company with a small cash balance would be the company most likely to pay a stock
(shares of stock) dividend.
An issuer would most likely call in its preferred stock when: - ANSWER✔✔-interest
rates are falling
EXPLANATION
Issuers would most likely call in an outstanding preferred or bond when interest rates
are falling because they could issue new securities with a lower dividend or interest rate
and reduce their expenses.
Which of the following are true of warrants? - ANSWER✔✔-The market price of the
stock is below the exercise price when they are issued.
EXPLANATION
Because warrants are used as an incentive or "sweetener," the exercise price of the
warrant will be more than the offering price of the new issue. As time passes and the
market price of the new issue rises, the warrant will become valuable.
Which of the following items would be used to calculate the Current Yield on common
stock? - ANSWER✔✔-Current market value of common stock
Annual dividend on common stock
EXPLANATION
The Current Yield formula is:
Annual Dividend divided by
Market Value of Common Stock
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
