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Series 7- Progress Exam 1a questions well answered to pass
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Series 7- Progress Exam 1a questions well answered to pass
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Series 7- Progress Exam 1aA corporation is in the 21% tax bracket. Which of the following choices provides the best return if the
corporation wants to invest some of its surplus cash?
AA preferred stock paying a 7.50% dividend
B A corporate bond yielding 8%
CA common stock yielding 6%
DA municipal bond yielding - correct answer ✔✔Corporations have a tax advantage on dividends
received from investments in preferred stock and common stock of other corporations. If the
corporation owns at least 20% of the distributing corporation, it must declare, as income, only 35% of
the dividends received (65% is excluded). If the corporation owns less than 20% of the distributing
corporation, it must declare as income 50% of the dividends received (remaining 50% is excluded). The
7.50% preferred stock provides the best return since at least 50% is excluded for tax purposes.
Which of the following proxy rules is TRUE regarding customer securities held in street name by a
brokerage firm?
AThe corporation sends the proxy to the customer
BThe corporation sends the proxy to the NYSE, which then sends it to the customer
CThe corporation sends the proxy to the SEC, which then sends it to the customer
D The corporation sends the proxy to the brokerage firm, which then sends it to the customer - correct
answer ✔✔A publicly held company must provide a means for shareholders who cannot attend
company meetings to vote on important matters. This is done through a proxy, which is a delegation of
the shareholder's vote. The corporation will send the proxy to all stockholders of record who can then
cast their votes without attending the meeting. When stock is held in street name (i.e., in the name of
the brokerage firm), the corporation sends the proxy to the brokerage firm, which is the stockholder of
record on the corporate books. The brokerage firm sends the proxy to the customer and the corporation
then pays the additional expenses. The SEC regulates the solicitations of proxy material.
(72523)
A registered representative invites 20 retail clients to a seminar and allows each client to bring one
guest. The sales script that is used for the presentation is considered:
, An interactive electronic forum
B Correspondence
C A public appearance
D Retail communication - correct answer ✔✔The key to this question is to identify the number of retail
investors (existing and/or prospective) who are receiving the communication. In this question, the 20
retail clients plus the 20 guests equals a total of 40 retail investors. Since the total number of retail
investors is more than 25, FINRA considers the sales script to be retail communication. If the number of
retail investors receiving the material was 25 or fewer, the communication would be considered
correspondence.
A client purchased 1,000 shares of ABC Corporation preferred stock at $80 per share. The company is
paying a quarterly dividend of $1.25 and the current market price is $90. The current yield is:
A.56%
B 5.56%
C6.25%
D16.67% - correct answer ✔✔The current yield on common or preferred stock is found by dividing the
yearly dividend by the current market price of the stock. In this example, the current market price of the
preferred stock is $90 and the yearly dividend is $5 ($1.25 x 4). This equals a current yield of 5.56% ($5
divided by $90 equals 5.56%, rounded off). The number of shares the client owns and the original cost of
the stock are not relevant in calculating the current yield.
What's the tax treatment of dividends if a corporation invests in the preferred or common shares of
another corporation?\
A20% of the dividends are excluded if ownership doesn't exceed 50%.
B20% of the dividends are excluded if ownership doesn't exceed 65%.
C50% of the dividends are excluded if ownership exceeds 20%.
D65% of the dividends are excluded if ownership exceeds 20%. - correct answer ✔✔According to the
corporate dividend exclusion rule, corporations are able to exclude from taxation a portion of the
dividends they receive from the common and/or preferred stocks that they own of other corporations. If
a corporation owns less than 20% of the distributing company, it's able to exclude 50% of eligible
dividends from taxation. However, if a corporation owns 20% or more of the distributing company, it's
able to exclude 65% of eligible dividends from taxation..
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