1. Under a pre-emptive right provision:
a) holders of common stock must be given the first option to purchase new shares
b) common shareholders have a pre-emptive right to dividends
c) preferred shareholders have the first option on new common share
d) dilution of existing positions is encouraged
2. A preferred issue carrying a call provision will carry:
a) a higher yield than non-callable preferred
b) a lower yield than non-callable preferred
c) the same yield as non-callable preferred
d) the same yield as callable debt
3. Wealthier shareholders tend to prefer:
a) a high dividend payout ratio
b) short term capital gains
c) floating rate dividends
d) capital appreciation
4. In chronological order, which of the following is correct:
a) ex-dividend date, holder of record date, payment date
b) holder of record date, ex-dividend date, holder of record date
c) payment date, ex-dividend date, holder of record date
d) holder of record date, payment date, ex-dividend date
5. The conversion ratio indicates:
a) the number of shares of common to which the security may be converted
b) the conversion price of the security
c) the number of bonds the common share may be converted to
d) the number of bonds the preferred share may be converted to
6. A warrant may best be defined as:
a) an option to sell a specified number of shares at a stated price
b) an option to buy a stated number of shares at a stated price
c) a convertible security
d) a bond derivative
7. Which of the following is not a non-financial motive for merging:
a) the desire to expand management capabilities
b) the need to expand marketing capabilities
c) the desire for easier access to capital markets
d) the acquisition of new products
8. If a firm acquires another firm with a higher P/E ratio:
a) postmerger earnings per share will be diluted
b) a cash acquisition is questionable
c) a stock-for-stock exchange should be pursued
d) none of the above are correct
9. The arrangement preferred by most business firms and foreign government is:
a) the joint venture
b) the export arrangement
c) the licensing agreement
d) the fully owned foreign subsidiary
10. The spot rate is:
a) unrelated to the foreign exchange rate
b) the rate of exchange for future delivery
c) the rate of exchange for immediate delivery
d) the "black market" exchange rate