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Question 1 of 10
1. Question
Which statement(s) is (are) true regarding stock split?
I. When an issuing company wants to make a stock more interesting for an investor, it often chooses to split common stock.
II. Although stock splits affect the number of votes an investor holds (because number of shares change), the percentage of votes and therefore the investor’s voting power remains the same.
III. Reverse split makes the stock cheaper and more accessible for some investors.
IV. Forward split often done if a stock has been devalued for some reason.Correct
Forward split: stock is split to create more shares with a decrease in
price. This would make the stock cheaper and more accessible for some investors. For instance, a 2-for-1 split of 100 shares of stock valued at $50would give an investor 200 shares of $25stock.
Reverse split: stock is combined to increase price and decreaseshares.
For example, a 1-for-2 reverse split of 100 shares of $50 stock would result in 50 shares of $100 stock. This is a less common practice, often done if a stock has been devalued for some reason.Incorrect
Forward split: stock is split to create more shares with a decrease in
price. This would make the stock cheaper and more accessible for some investors. For instance, a 2-for-1 split of 100 shares of stock valued at $50would give an investor 200 shares of $25stock.
Reverse split: stock is combined to increase price and decreaseshares.
For example, a 1-for-2 reverse split of 100 shares of $50 stock would result in 50 shares of $100 stock. This is a less common practice, often done if a stock has been devalued for some reason. -
Question 2 of 10
2. Question
Which statement(s) is (are) incorrect regarding stock dividend?
I. In case of stock dividend, the investor receives their dividends in stocks.
II. Stock dividend is non-taxable
III. Stock dividend decreases the value of the stock.
IV. Stock dividend is taxable.Correct
Stock dividend: the investor receives their dividends in stocks, which is non-taxable.
Cash dividend: the investor receives dividend in cash, which is taxable and decreases the value of the stock.Incorrect
Stock dividend: the investor receives their dividends in stocks, which is non-taxable.
Cash dividend: the investor receives dividend in cash, which is taxable and decreases the value of the stock. -
Question 3 of 10
3. Question
A 10 percent cash dividend on $10 stock will give the investor $1 per share. The day after the dividend is distributed, stock is worth-
Correct
A 10 percent cash dividend on $10 stock will give the investor $1 per
share. The day after the dividend is distributed, called the ex-dividend date, stock is
worth $9 a share.Incorrect
A 10 percent cash dividend on $10 stock will give the investor $1 per
share. The day after the dividend is distributed, called the ex-dividend date, stock is
worth $9 a share. -
Question 4 of 10
4. Question
Which is the correct relationship to calculate the value of a right?
I. Value of a right = (market price – subscription price) ÷ number of rights to purchase one share -1
II. Value of a right = (market price + subscription price) ÷ number of rights to purchase one share +1
III. Value of a right = (market price – subscription price) * number of rights to purchase one share +1
IV. Value of a right = (market price – subscription price) ÷ number of rights to purchase one share +1Correct
How to calculate the value of a right: Value of a right = (market price – subscription price) ÷ number of rights to purchase one share +1
Incorrect
-
Question 5 of 10
5. Question
Which is (are) the correct statement(s) regarding different types of preferred stock?
I. Adjustable or floating rate preferred stock: dividend rate of stock is reset every 12 months in line with market interest rates.
II. Participating preferred stock: investor receives common stock dividend.
III. Callable preferred stock: gives issuer the right to buy back preferred stock at anytime.
IV. Cumulative preferred stock: if dividend is not paid, it accumulates and is owed.Correct
The different types of preferred stock are:
•Cumulative preferred stock: if dividend is not paid, it accumulates and
isowed.
•Callable preferred stock: gives issuer the right to buy back preferred
stock at anytime.
•Participating preferred stock: investor receives common stockdividend.
•Adjustable or floating rate preferred stock: dividend rate of stock is reset
every six months in line with market interestrates.Incorrect
The different types of preferred stock are:
•Cumulative preferred stock: if dividend is not paid, it accumulates and
isowed.
•Callable preferred stock: gives issuer the right to buy back preferred
stock at anytime.
•Participating preferred stock: investor receives common stockdividend.
•Adjustable or floating rate preferred stock: dividend rate of stock is reset
every six months in line with market interestrates. -
Question 6 of 10
6. Question
The correct relationship of Conversion ratio is-
Correct
conversion ratio = par value/conversion price.
Incorrect
conversion ratio = par value/conversion price.
-
Question 7 of 10
7. Question
Which statement(s) is (are) true regarding American Depository Receipts (ADRs)?
I. ADRs administer foreign trades.
II. ADRs are receipts for a foreign security traded in the U.S., as well as a way to buy foreign stock.
III. ADRs is negotiable, can be transferred or sold.
IV. ADR’s dividends are paid in U.S. dollars, it carries applicable currency risk, due to the conversion of foreign currency at the market price.Correct
American Depository Receipts (ADRs) With the global economy of today, trading does not simply stop at the U.S. border. In order to administer foreign trades, there are ADRs, which are receipts for a foreign security traded in the U.S., as well as a way to buy foreign stock. It is nego- tiable, which means it can be transferred or sold. Because an ADR’s dividends are paid in U.S. dollars, it carries applicable currency risk, due to the conversion of for- eign currency at the market price.
Incorrect
American Depository Receipts (ADRs) With the global economy of today, trading does not simply stop at the U.S. border. In order to administer foreign trades, there are ADRs, which are receipts for a foreign security traded in the U.S., as well as a way to buy foreign stock. It is nego- tiable, which means it can be transferred or sold. Because an ADR’s dividends are paid in U.S. dollars, it carries applicable currency risk, due to the conversion of for- eign currency at the market price.
-
Question 8 of 10
8. Question
Which statement(s) is (are) incorrect regarding Bonds?
I. Bonds act as loans to the corporation to be repaid like debt.
II. The holder of bonds is guaranteed payment of the principal, and receives interest on their investment.
III. When investing in corporate bonds, the investor is a creditor rather than an owner of a part of a corporation.
IV. Bonds are considered to carry more risk than stocks.Correct
Bonds are debt instruments: they act as loans to the corporation to be re- paid like debt.
The holder of bonds is guaranteed payment of the principal, and receives interest on their investment. When investing in corporate bonds, the investor is a creditor rather than an owner of a part of a corporation. Debt instruments, or bonds, are considered to carry less risk than stocks as there is no loss of principal investment.Incorrect
Bonds are debt instruments: they act as loans to the corporation to be re- paid like debt.
The holder of bonds is guaranteed payment of the principal, and receives interest on their investment. When investing in corporate bonds, the investor is a creditor rather than an owner of a part of a corporation. Debt instruments, or bonds, are considered to carry less risk than stocks as there is no loss of principal investment. -
Question 9 of 10
9. Question
A bond’s indenture agreement specifies-
I. Par value
II. Coupon rate
III. Dividend rate
IV. MaturityCorrect
A bond’s indenture agreement specifies par value, coupon rate, maturity, collateral, and convertible or callable features.
Incorrect
A bond’s indenture agreement specifies par value, coupon rate, maturity, collateral, and convertible or callable features.
-
Question 10 of 10
10. Question
Which is (are) the correct statement(s) regarding bond’s par value?
I. Bonds par value is a crucial value used in all calculations, such as dividend.
II. A bond’s par value is printed on the back of the bond certificate.
III. Par value of a bond is the face value at issuance.
IV. A bond’s par value acts as a benchmark in future trading.Correct
Bonds par value is a crucial value used in all calculations, such as dividend. A bond’s par value is printed on the front of the bond certificate. Par value of a bond is the face value at issuance and acts as a benchmark in future trading.
Incorrect
Bonds par value is a crucial value used in all calculations, such as dividend. A bond’s par value is printed on the front of the bond certificate. Par value of a bond is the face value at issuance and acts as a benchmark in future trading.