Security Test Chapter 3

The formula for finding conversion ratio on convertible preferred stock is: _______/ ______________

True or False: Convertible preferred stock may be converted into a bond.

• True

• False. Convertible securities are convertible into common stock.

True or False: Callable preferred shares allow an investor to buy shares of common stock at a fixed price.

• True

• False. If preferred shares are callable, the issuer is allowed to buy back the shares at a fixed price.

True or False: Corporate shareholders have limited liability.

• True. Shareholders can only lose their original investment if a company declares bankruptcy.

• False

True or False: ADRs must be issued with cooperation from the foreign issuer.

• True

• False. ADRs that are issued without assistance from the foreign company are considered unsponsored.

True or False: Issuers of unsponsored ADRs are subject to SEC reporting requirements.

• True

• False. Issuers of ADRs, foreign governments, and foreign private issuers are exempt from the reporting requirements.

__________________ stock is stock that was issued and repurchased by the issuing corporation.

True or False: Warrants are generally attached to the delivery of another security (stock or bond).

• TRUE

• FALSE

$ _____________ is normally the par value for preferred stock.

True or False: All owners have the right to vote.

• True

• False. Only common stockholders have the right to vote.