Series 6

Series 6 practice questions, page 9 of 13, with answer review and explanations.

Question 41

Simple Simon owns 1,000 shares in the Pasty Pie Corporation, which has just declared a stock dividend of 5%. Just prior to this announcement, Pasty Pie was selling for $10 a share. This announcement will:

  1. increase Pasty’s shares outstanding and reduce Simple’s proportionate ownership in the firm.
  2. increase the number of shares that Simple owns to 1,050, which will increase the market value of the shares that he owns from $10,000 to $10,500.
  3. increase the number of shares that Simple owns to 1,050, but this will not affect the market value of Simple’s holdings.
  4. increase Simple’s cash by the amount of the dividend paid: 0.05 x $10 = $0.50 x 1,000 shares = $500.

Question 42

Cliff places an order to sell 500 shares of the stock of Gap, Inc. (GPS) via his broker’s website. Cliff does not currently own any shares of GPS. This order is:

  1. illegal, and the broker’s website will reject it.
  2. an example of a stop loss order.
  3. referred to as a short sale.
  4. indicating that Cliff expects the price of Gap, Inc. to rise.

Question 43

An order to buy or sell a stock at the prevailing market price is called a(n):

  1. open-ended order.
  2. market order.
  3. stop order.
  4. limit order.

Question 44

The stock of Nutrisystem, Inc. (NTRI) is selling for $17.70 when Miss Piggy places a limit order to buy the stock at $17.65. During the period the order is open, NTRI falls to $17.60 and then increases to $17.67. Which of the following statements is most likely to be true in this scenario?

  1. Miss Piggy bought NTRI at $17.67 a share.
  2. Miss Piggy bought the stock for no more than $17.65 a share.
  3. Miss Piggy bought the stock for no more than $17.60 a share.
  4. Miss Piggy bought the stock for $17.66 a share.

Question 45

Mr. A. D. Venturer owns 10,000 shares of Risky Corporation, which is currently selling for $8 a share. He is leaving shortly for an extended trip to Antarctica and will be out of communication for that time. He doesnt want to liquidate his investment in Risky before he goes, but he doesnt want to return to find that his $80,000 investment is worth little to nothing. Which of the following options would make sense for Mr. Venturer?

  1. buy a call option on Risky stock with an $8 strike price and an expiration date that occurs after his return
  2. place a stop sell order at a price less than $8 a share-perhaps $6 or $7 a share
  3. place a limit order to sell Risky at either $8 a share or a price slightly less than $8 a share
  4. enter a good 'til cancelled (GTC) market order to sell Risky