Series 7

Series 7 practice questions, page 4 of 16, with answer review and explanations.

Question 16

Bubba wants to buy a $4 convertible preferred with that has a $50 par value and is exchangeable for common stock at $47.50. If the preferred stock is trading at 52, what does Bubba calculate as the common stock price in order to be at parity with the preferred?

  1. 47.50
  2. 52.00
  3. a little less than 49.38
  4. a little more than 54.50

Question 17

Which of the following is an analyst most likely to classify as a defensive issue?

  1. the securities of a company that airplanes to the military
  2. a stock of a large company
  3. the common stock of a utility company
  4. a corporate bond

Question 18

Which securities do not receive dividends?

  1. ADRs
  2. warrants
  3. common stock
  4. preferred stock

Question 19

Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40. What conversion ratio does Bubba determine?

  1. 40
  2. 30
  3. 25
  4. 15

Question 20

Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40. The bond increases in value by 20 points. What is the conversion parity of the stock?

  1. $25
  2. $40
  3. $48
  4. $50