La entente del terror, la operación Cóndor

Score: 1/1

55.

GHI Co. declared a reverse stock split. Determine the impact this will have on its cash position.

Student

Response Value Correct Answer Feedback A. Decrease

in cash position.

B. Decrease in cash position but only after the reverse split is finalized.

C. No change in cash position.

100%

D. Increase in cash position.

General

Feedback: If a reverse split of one new share for ten old were implemented, a shareholder owning 100 shares of stock would own only 10 new shares after the reverse split. If the shares were selling at $0.25 before the reverse split, the new shares would probably trade near $2.50 per share. The total dollar value of the holdings would not be affected: $0.25 × 100 shares pre consolidation = $2.50 × 10 shares after the consolidation. Text reference: Chapter 8: Equity Securities: Common and Preferred Shares.

Score: 1/1

56.

Maurice is considering the purchase of a Nova Scotia Power Inc. 5.75% bond due March 15, 2025. If Maurice purchases this bond, list the 3 variables he should use to calculate how much accrued interest is payable.

Student Response

Value Correct Answer Feedback A. The

principal amount, the coupon rate, and the time period between coupon payment and

settlement.

100%

B. The principal amount,

the yield to call, and the term to maturity.

C. The purchase price, the current yield, and the term to maturity.

D. The purchase price, the yield to maturity, and the time period between coupon payment and

settlement.

General

Feedback: The amount of accrued interest is found by using three numbers:

The principal amount The coupon rate

The time period from the day after the previous interest payment date up to and including the day of settlement.

Text reference: Chapter 7: Fixed-Income Securities: Pricing and Trading.

Score: 1/1

57.

What is a characteristic of a Government of Canada marketable bond?

Student

Response Value Correct Answer Feedback A. Cashable

at full par value.

B. Price does not react to interest rate changes.

C. Maximum purchase amount per

individual.

D. Tradable in the secondary market.

100%

General Feedback:

The Government of Canada issues marketable bonds in its own name. These issues are called marketable bonds because, as well as having a specific maturity date and a specified interest rate, they are transferable, which means that they may be traded in the market. Text reference: Chapter 6: Fixed-Income Securities: Features and Types.

Score: 1/1

58.

An investor placed a buy order for 10,000 shares of BMX Inc. with instructions to automatically cancel the order if it is not filled by the end of the third trading day. What kind of order is this?

Student

Response Value Correct Answer Feedback A. All or none

order.

B. Any part order.

C. Good through order.

100%

D. Good till cancelled order.

General

Feedback: Good Through Order: An order to buy or sell that is good for a specified number of days and then automatically cancelled if it has not been filled by the end of the trading session on the date specified in the order. Text reference: Chapter 9:

Equity Securities: Equity Transactions.

Score: 1/1

59.

In what 3 ways does the exchange-traded derivatives market differ from the over-the-counter (OTC) derivatives market?

Student

Response Value Correct

Answer Feedback

A. Clearinghouse performance guarantee, standardization, and liquidity.

100%

B. Clearinghouse performance guarantee, contract variety, and privacy.

C. Contract variety, liquidity, and mandatory physical settlement at expiration.

D. Standardization, privacy, and marking-to-market of daily profits and losses.

General Feedback:

Clearinghouses, which are set up by exchanges to ensure that markets operate efficiently, guarantee the financial obligations of every party and contract. The clearing corporation becomes, in effect, the buyer for every seller and the seller for every buyer. Standardization allows users to offset their contracts prior to expiration and provides the backing of a clearinghouse. Text reference: Chapter 10:

Derivatives.

Score: 1/1

60.

Marjorie wants to purchase preferred shares in a non-registered account and is seeking an investment that has the potential of deferring tax. If Marjorie does not need a regular stream of income, recommend her best investment option.

Student

Response Value Correct Answer Feedback A. Cumulative

preferred shares.

B. Deferred preferred shares.

100%

C. Participating preferred shares.

D. Voting preferred shares.

General Feedback:

Deferred preferred shares allow investors to defer taxes paid on income earned until a later date and are attractive to investors who do not have an immediate need for regular income. The shares are also attractive for investors who want to receive compounded growth in a registered account, such as an RRSP, as taxes are deferred to a later period.

Text reference: Chapter 8: Equity Securities: Common and Preferred Shares.

Score: 1/1

61.

What is one benefit of preferred shares that is not provided by common shares?

Student

Response Value Correct Answer Feedback A. Greater

potential for capital

appreciation.

B. Preferential dividend payments.

100%

C. Prior claim on company assets before

bondholders.

D. Voting rights.

General Feedback:

Preferred shareholders are usually entitled to a fixed dividend payment subject to the discretion of the Board of Directors. Since most preferred shares can be considered fixed-income securities, they do not offer, from an investment standpoint, the same potential for capital appreciation that common shares provide. Should interest rates decline, the preferred will increase in price, much like a bond; but good corporate earnings will have no effect on the dividend rate or equity allocation. Thus, the dividend rate is of prime importance to the preferred shareholder. Text reference: