FINRA SIE Exam # 68 Complete
(Q&A) Spring 2023.
If interest Rates fall the issuer will most likely call which bonds
first? - -High Dividend Rate preferred issues trading at a
premium
-What are some actions by a corporation will affect an
individuals common shareholder's equity - -Conversion 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 - -Convertible 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? - -Can 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? - -Quarterly
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? - -A
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? - -10,000
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?
Interest rates? - -Interest 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.
-Rights are? - -Exerciserable, Negotiable (can be traded),
Giftable
-Dividends can be paid in the form of? - -Cash or products
Additional shares of ANOTHER company (yes another company)
Additional shares of that company
, NOT Options and Not Tax deferments
-Preferred Stock is? - -Performance based, participating,
cumulative (dividends)
It is not refundable or redeemable
-A corporate bond which is backed solely by full faith and credit
of the issuer.. - -Debenture
-Trades of all of the following will settle in Fed Funds Except?
1) US Treasury Bonds
2) Treasury Bills
3) Prime Commercial Paper
4) Prime Banker's Acceptances - -3) Prime commercial paper is
not traded by the Federal Reserve therefore does not settle in
Fed Funds
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 - -Capitalized 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 - -The current yield
will be higher than the nominal yield.
The nominal yield (stated yield) will be 7%
(Q&A) Spring 2023.
If interest Rates fall the issuer will most likely call which bonds
first? - -High Dividend Rate preferred issues trading at a
premium
-What are some actions by a corporation will affect an
individuals common shareholder's equity - -Conversion 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 - -Convertible 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? - -Can 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? - -Quarterly
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? - -A
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? - -10,000
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?
Interest rates? - -Interest 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.
-Rights are? - -Exerciserable, Negotiable (can be traded),
Giftable
-Dividends can be paid in the form of? - -Cash or products
Additional shares of ANOTHER company (yes another company)
Additional shares of that company
, NOT Options and Not Tax deferments
-Preferred Stock is? - -Performance based, participating,
cumulative (dividends)
It is not refundable or redeemable
-A corporate bond which is backed solely by full faith and credit
of the issuer.. - -Debenture
-Trades of all of the following will settle in Fed Funds Except?
1) US Treasury Bonds
2) Treasury Bills
3) Prime Commercial Paper
4) Prime Banker's Acceptances - -3) Prime commercial paper is
not traded by the Federal Reserve therefore does not settle in
Fed Funds
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 - -Capitalized 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 - -The current yield
will be higher than the nominal yield.
The nominal yield (stated yield) will be 7%
