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Question 1 of 10
1. Question
Who among the following stockholders is not offered board voting rights?
I. Common stockholders
II. Preferred stockholders
III. Convertible preferred stockholders
IV. Initial stockholdersCorrect
Common stockholders benefit from ownership by having input on the operation of the company, such as voting rights on membership on the board. Board voting rights are only afforded to common stockholders, not preferred stockholders.
Incorrect
Common stockholders benefit from ownership by having input on the operation of the company, such as voting rights on membership on the board. Board voting rights are only afforded to common stockholders, not preferred stockholders.
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Question 2 of 10
2. Question
Which of the following statement is true about preferred stock?
I. It tends to pay a higher dividend compared to common stock.
II. It appreciates quickly.
III. It is more volatile than common stock.
IV. Preferred stockholders receive their dividends before common stockholders.Correct
Preferred stocks tend to pay a higher dividend than those received from common stock but do not appreciate as quickly as common stock. Preferred stockholders also must receive their dividends before common stockholders. Preferred stock tends to be less volatile than common stock, and while this results in slower growth, it also lends to less loss in a down market.
Incorrect
Preferred stocks tend to pay a higher dividend than those received from common stock but do not appreciate as quickly as common stock. Preferred stockholders also must receive their dividends before common stockholders. Preferred stock tends to be less volatile than common stock, and while this results in slower growth, it also lends to less loss in a down market.
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Question 3 of 10
3. Question
Investors benefit from warrants in which of the following ways?
I. They can sell them to other investors and collect the premium for a security in which they had no investment.
II. They can sell them to other investors and collect the premium for a bond.
III. They can use them as call options.
IV. They can exercise them and buy a well performing security for less than market value.Correct
Investors benefit from warrants in several ways. They can sell them to other investors and collect the premium for a security in which they had no investment, or they can exercise them and buy a well- performing security for less than market value.
Incorrect
Investors benefit from warrants in several ways. They can sell them to other investors and collect the premium for a security in which they had no investment, or they can exercise them and buy a well- performing security for less than market value.
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Question 4 of 10
4. Question
Which of the following statement is false about warrants?
I. Warrants are the same as call options.
II. Warrants allows the investor to buy securities directly from the issuer.
III. Warrants have shorter periods until expiration, usually measured in months.
IV. Warrants are derivative securities.Correct
Warrants are derivative securities that allow the investor to buy securities directly from the issuer at a given price within a defined period of time. Warrants differ from call options in that they originate from the issuing company, and calls are sold by other investors. Warrants also tend to have longer periods until expiration than options, usually measured in years instead of the months common to options.
Incorrect
Warrants are derivative securities that allow the investor to buy securities directly from the issuer at a given price within a defined period of time. Warrants differ from call options in that they originate from the issuing company, and calls are sold by other investors. Warrants also tend to have longer periods until expiration than options, usually measured in years instead of the months common to options.
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Question 5 of 10
5. Question
Which of the following is true about American depository receipts?
I. They represent bonds on foreign exchanges
II. Investors benefit by taking part in investing in foreign ventures
III. They use other currencies as their native denomination
IV. They bypass duties imposed on some transactionsCorrect
American depositary receipts, or ADRs, are tradable certificates representing shares of stock traded on foreign exchanges. To facilitate trade on American exchanges, ADRs use United State dollars as their native denomination. ADRs effectively bypass duties imposed on such transactions and the administrative costs related thereto if the same security had been purchased on a foreign exchange. Additionally, investors benefit by taking part in investing in foreign ventures.
Incorrect
American depositary receipts, or ADRs, are tradable certificates representing shares of stock traded on foreign exchanges. To facilitate trade on American exchanges, ADRs use United State dollars as their native denomination. ADRs effectively bypass duties imposed on such transactions and the administrative costs related thereto if the same security had been purchased on a foreign exchange. Additionally, investors benefit by taking part in investing in foreign ventures.
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Question 6 of 10
6. Question
Having discretion over a client’s funds gives the advisor authority to decide which of the following?
I. Decide which security to buy
II. Decide the amount of the security
III. Decide which security to sell
IV. Decide which type of bank account to useCorrect
Having discretion over a client’s funds gives the advisor authority to decide which security to trade, whether to buy or sell that security and the amount of that security.
Incorrect
Having discretion over a client’s funds gives the advisor authority to decide which security to trade, whether to buy or sell that security and the amount of that security.
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Question 7 of 10
7. Question
Which of the following is false about churning?
I. It is unethical and illegal although it provides the client with a profit
II. It is the act of an advisor making trades in a client’s account for the sole purpose of generating commissions for the advisor
III. It is the act of an advisor making trades in a client’s account for the sole purpose of generating commissions for the client
IV. It is acting in the best interest of the clientCorrect
Churning is the act of an advisor making trades in a client’s account for the sole purpose of generating commissions for the advisor. This is unethical and illegal even in the event that it provides the client with a profit. Churning is not acting in the best interest of the client.
Incorrect
Churning is the act of an advisor making trades in a client’s account for the sole purpose of generating commissions for the advisor. This is unethical and illegal even in the event that it provides the client with a profit. Churning is not acting in the best interest of the client.
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Question 8 of 10
8. Question
The goal of Bank Secrecy Act (BSA) includes which of the following?
I. Detect current violation
II. Control present investment rate
III. Prevent future illegal activity
IV. Prevent transaction linkage to unwanted third partyCorrect
The goal of the BSA is to detect current violations and to prevent future illegal activity.
Incorrect
The goal of the BSA is to detect current violations and to prevent future illegal activity.
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Question 9 of 10
9. Question
Who among the following has the ability to practice insider trading with regards to a given security?
I. Directors of the company with nonpublic information of relevance to the security.
II. Company planners with nonpublic information that are irrelevant to the security.
III. Family members of persons with nonpublic information of relevance to the security.
IV. Anybody with non public information relevant to the security.Correct
Insider trading refers to a person or persons trading a specific security to prevent loss or generate gain based on that personal or those persons’ access to nonpublic information that is relevant to the security.
Incorrect
Insider trading refers to a person or persons trading a specific security to prevent loss or generate gain based on that personal or those persons’ access to nonpublic information that is relevant to the security.
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Question 10 of 10
10. Question
Which of the following statements is false about selling away?
I. Selling away is the act of a broker soliciting a client to buy securities that are offered by the broker’s employer
II. Selling away is a violation of the contract that the broker has with the employee
III. Selling away usually constitute a violation of securities regulations
IV. Selling away is ethical as it is good for businessCorrect
Selling away is the act of a broker soliciting a client or prospective clients to buy securities that are not offered by the broker’s employer. Selling away is usually a violation of the contract that the broker has with the employer, usually a broker-dealer, and is therefore unethical. Selling away also usually constitutes a violation of securities regulation and can have legal consequences.
Incorrect
Selling away is the act of a broker soliciting a client or prospective clients to buy securities that are not offered by the broker’s employer. Selling away is usually a violation of the contract that the broker has with the employer, usually a broker-dealer, and is therefore unethical. Selling away also usually constitutes a violation of securities regulation and can have legal consequences.