FINRA SIE EXAM QUESTIONS
WITH CORRECT ANSWERS
If interest Rates fall the issuer will most likely call which bonds first? --
Answer ✔✔ High Dividend Rate preferred issues trading at a premium
What are some actions by a corporation will affect an individuals
common shareholder's equity -- Answer ✔✔ 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 --
Answer ✔✔ 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? -- Answer ✔✔ 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? -- Answer ✔✔
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? -- Answer
✔✔ 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? -- Answer ✔✔ 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? -- Answer ✔✔ 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? -- Answer ✔✔ Exerciserable, Negotiable (can be traded),
Giftable
Dividends can be paid in the form of? -- Answer ✔✔ Cash or products
Additional shares of ANOTHER company (yes another company)
Additional shares of that company
WITH CORRECT ANSWERS
If interest Rates fall the issuer will most likely call which bonds first? --
Answer ✔✔ High Dividend Rate preferred issues trading at a premium
What are some actions by a corporation will affect an individuals
common shareholder's equity -- Answer ✔✔ 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 --
Answer ✔✔ 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? -- Answer ✔✔ 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? -- Answer ✔✔
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? -- Answer
✔✔ 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? -- Answer ✔✔ 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? -- Answer ✔✔ 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? -- Answer ✔✔ Exerciserable, Negotiable (can be traded),
Giftable
Dividends can be paid in the form of? -- Answer ✔✔ Cash or products
Additional shares of ANOTHER company (yes another company)
Additional shares of that company
