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Series 65: Unit 1 Exam questions with verified answers graded A+
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Series 65: Unit 1 Exam questions with verified answers graded A+
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Series 65: Unit 1 ExamOne difference between common stock and preferred stock is that common stockholders
A. have a priority claim on earnings.
B. own equity in the company.
C. have voting rights.
D. receive dividends when declared by the board of directors. - correct answer ✔✔Have voting rights
It is rare to find a preferred stock with voting rights and even rarer to find a common stock without them.
Both receive dividends when, and if, declared by the board of directors, and these dividends are usually
paid quarterly. Both are equity securities, and preferred has the prior claim.
Ownership in a corporation is evidenced by holding shares of the company's
A. common or preferred stock.
B. warrants.
C. common stock only.
D. bonds with a first mortgage on the property. - correct answer ✔✔Common or preferred stock
If you have equity in a corporation, it means you have an ownership interest. Equity securities (common
and preferred stock) represent ownership in a corporation. A mortgage bond is a debt security, and a
warrant gives the holder the right to acquire equity but, in itself, is not equity.
For a profitable and rapidly growing firm, holders of preference shares are least likely to benefit from the
firm's growth if the preference shares are
A. common.
B. participating.
, C. cumulative.
D. convertible. - correct answer ✔✔Cumulative
Preferred stock shares, sometimes called preference shares, are cumulative if any dividends in arrears
must be paid before the firm pays any common dividends. A profitable and rapidly growing firm is
unlikely to be in arrears on its preferred dividends. Just as important, the return on those shares is fixed,
and regardless of the growth in the company's earnings, the dividend will remain the same. Participating
preferred shares may receive additional dividends if the firm's profits exceed a stated level. Convertible
preferred shares can benefit from the firm's growth because of the ability to convert to common shares.
The question is asking about preferred stock; do not make a silly error and choose common stock.
When comparing restricted stock to nonrestricted stock, it is important to note that the restricted stock
has a restriction placed upon its
A. priority in liquidation.
B. receipt of dividends.
C. resale.
D. voting rights. - correct answer ✔✔Resale
When a stock is restricted, the restriction applies solely to a time limit within which the stock cannot be
sold. That restriction is found in Rule 144 of the Securities Act of 1933 and applies to unregistered or
control stock.
An ADR is used to
A. reduce currency risk when investing in foreign securities.
B. facilitate trading in foreign securities in U.S. markets by U.S. citizens living in the United States.
C. finance foreign trade in which U.S. citizens are engaged.
D. facilitate trading in U.S. securities in foreign markets by U.S. citizens living abroad. - correct answer
✔✔facilitate trading in foreign securities in U.S. markets by U.S. citizens living in the United States
American depositary receipts (ADRs) make trading in foreign securities easier in U.S. markets for U.S.
investors
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