SIE Exam 2021
What are statutory voting rights? - ANSWER-Allows the shareholder to vote one time per share for each seat on the board.
If the investor owns 10 shares, she can use 10 shares to vote for position #1 and 10 shares to vote for position #2.
What are cumulative voting rights? - A...
SIE Exam 2021
What are statutory voting rights? - ANSWER-Allows the shareholder to vote one time per share for each
seat on the board.
If the investor owns 10 shares, she can use 10 shares to vote for position #1 and 10 shares to vote for
position #2.
What are cumulative voting rights? - ANSWER-Allows the shareholder to pool votes together and then
allocate as desired.
If the investor owns 10 shares and there are 2 open seats, she can use all 20 shares to vote for a single
candidate.
When are common stockholders paid in a liquidation? - ANSWER-Last
What are pre-emptive rights? - ANSWER-Give investors the right to acquire additional shares to maintain
a proportionate interest in a company's stock (not increase their position) when new shares are issued.
This prevents dilution.
Are rights and warrants traded as independent securities in the secondary market? - ANSWER-Yes
Do warrants or rights remain outstanding longer? - ANSWER-Warrants
Are warrants issued with intrinsic value? - ANSWER-No, they are not valuable until the stock's price
increases.
What is the market value of a warrant connected to? - ANSWER-The value of the underlying stock
What is the exercise price of rights? - ANSWER-Below current market value
,What is the exercise price of warrants? - ANSWER-Above the current market value
Are warrants typically issued in connection with another security in order to make that security more
attractive? - ANSWER-Yes
What are characteristics of penny stocks? - ANSWER-Unlisted
Low-priced
Risky
Volatile
Less liquid than blue chip stocks
What happens when a dividend is issued to an ADR holder? - ANSWER-The ADR holder can receive a
lower dividend than was actually declared by the foreign company. The foreign government might have
withheld a % of the dividend for tax purposes.
Do ADRs have call risk? - ANSWER-No, because they are common stock.
What types of risk do ADRs have? - ANSWER-Currency risk and political risk
Do holders of preferred stock have voting rights? - ANSWER-No, only common stock holders.
What is a preferred stock dividend quoted as a percentage of? - ANSWER-As a % of par NOT as a % of the
price at which the stock is currently trading
What is cumulative preferred stock? - ANSWER-Entitles investors to receive dividends in arrears (i.e.
entitles them to receive missed dividend payments).
What types of preferred shares provide an advantage to the investor? - ANSWER-Cumulative
Convertible
,Participating preferred
What types of preferred shares provide an advantage to the issuer? - ANSWER-Callable preferred
Do preferred shares that benefit the investor or issuer pay higher dividends? - ANSWER-Preferred shares
that benefit the issuer
Do preferred or common stock have a higher potential for appreciation/capital gains? - ANSWER-
Common stock
What does a transfer agent do? - ANSWER-Responsible for ensuring that investors receive the
appropriate shares in a corporate event (i.e. stock split or stock dividend).
What is regular way trade? - ANSWER-Settles T+2 days
What is the ex-date for regular way trade? - ANSWER-The business day before the record date.
What is the order of 4 dates that occur in the payment of a cash dividend? - ANSWER-DERP:
1. Declaration date
2. Ex-dividend date
3. Record date
4. Payable date
In a stock split, how does the overall value of the investors' position change? - ANSWER-It does not
change
How do you calculate the new number of shares after a split? - ANSWER-Shares * first number / second
number
How do you calculate the new price after a split? - ANSWER-Price / first number * second number
, What risk do short-sellers have? - ANSWER-Unlimited
What is the par value of a bond? - ANSWER-$1,000
What is a bond quoted at 97 worth? - ANSWER-$970
When a bond matures, what do investors receive? - ANSWER-Principal ($1000) + Semiannual Coupon
Payment
Is interest calculated based on bond's par value or market price? - ANSWER-Bond's par value
What is the relationship between interest rates and bond prices? - ANSWER-As interest rates increase,
bond prices decrease
When is a bond trading at a premium? - ANSWER-Market value > par value
When is a bond trading at a discount? - ANSWER-Market value < par value
As a bond reaches maturity, what does the price move towards? - ANSWER-Towards the par value
When will an issuer call a bond? - ANSWER-When interest rates are declining
What happens if an issuer calls a bond? - ANSWER-The bondholder receives final semiannual coupon
payment + call premium
Does a call feature benefit the issuer or investor? - ANSWER-Issuer
When would investors exercise a put feature? - ANSWER-When interest rates increase
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