A type of preferred stock for which any dividends missed in prior years must be paid before common shareholders may receive any dividends is referred to as:
Answer(s): A
The type of preferred stock that requires that any dividends missed in prior years be paid before common shareholders may receive any dividends is referred to as cumulative preferred stock. Participating preferred stock allows the preferred shareholders to earn extra dividends if the firm has higher than normal earnings. Convertible preferred stock allows the preferred shareholders to convert their shares to common stock. Adjustable rate preferred has a variable dividend rate that is tied to some benchmark.
Which of the following statements about primary market transactions is true?
Answer(s): B
In a primary market transaction, the issuer of the security receives the proceeds from the sale of the security. A secondary market transaction involves the purchase and sale of a security between investors, and the seller of the security receives the proceeds from the sale. Both stocks and bonds are initially introduced to the market as primary market securities and are then traded in the secondary market.
A warrant differs from a standard call option in that:
A warrant differs from a standard call option in that when a warrant is exercised, the firm whose stock is being purchased will have an increase in cash; this is not the case when a standard call option is exercised. Both the warrant and the call option give the holder the right to purchase shares of a firm's stock, but the writer (seller) of a warrant is the firm itself whereas the writer of a standard call option is simply another investor. Upon exercising a warrant, the investor buys the stock from the firm itself, which increases the firm's cash account. When a call option is exercised, another investor's cash account is increased. For the same reason, when a call option is exercised, nothing happens to the outstanding shares of the firm; but when a warrant is exercised, the firm's outstanding shares will increase.
Which of the following are fiscal policy tools under the jurisdiction of the U.S. Congress?
The decision on whether to raise or lower effective tax rates is a fiscal policy tool under the jurisdiction of the U.S. Congress. The decision on the amount of cash reserves a bank must hold (the reserve requirement) and the decision on whether to raise or lower the rate at which banks can borrow money from the Federal Reserve (the discount rate) are monetary policy tools under the jurisdiction of the Federal Reserve.
Ralph has a traditional IRA from which he has yet to make any withdrawals. Ralph will be turning 70 ½ in June, 2011.According to the required minimum distribution rule associated with traditional IRAs, Ralph is required to start withdrawing funds from this account:
Answer(s): C
According to the required minimum distribution rule associated with traditional IRAs, Ralph is required to start withdrawing funds from this account on April 1, 2012. The rule states that he must begin making withdrawals on April 1st of the year following the year in which he turns 70 ½.
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