Securities Industry Essentials Exam (SIE) Lesson 3 Preferred Stock Quiz Video
Quiz Questions
1. Preferred stock is different than common stock because ___.
A. preferred stock has a significant par value while common stock has a very low par value or no par value at all
B. preferred stock pays a fixed dividend while common stock pays a variable dividend
C. preferred stock has no voting rights while common stock has voting rights
D. all of the above
2. In the event of a company’s dissolution, the value of the stock would be equal to the ___.
A. dividend
B. interest
C. par value
D. parity value
3. Which is the correct order according to who gets paid first during a dissolution of a company?
A. common stockholders, creditors, preferred stockholders
B. creditors, common stockholders, preferred stockholders
C. creditors, preferred stockholders, common stockholders
D. preferred stockholders, common stockholders, creditors
4. Which of the following factors affects the price of preferred stock in the secondary market?
A. dividend value
B. interest rate movement
C. nature of the secondary market
D. number of stocks issued
5. The dividends of preferred stocks are always paid semi-annually.
A. True
B. False
6. A preferred stock that has a stated dividend guarantees the common stockholder to always receive a dividend.
A. True
B. False
7. In 2021, the tax exclusion rate for preferred stock dividends of corporations which own less than 20% of a company’s stock is ___.
A. 20%
B. 30%
C. 50%
D. 80%
8. The tax exclusion rate for the dividends of corporations is also applicable to common stocks.
A. True
B. False
9. The following are nonqualified dividends EXCEPT ___.
A. individual dividend
B. money market funds
C. mutual funds
D. All of the above are nonqualified dividends.
10. This is the time when the company may choose to buy back the preferred stocks that they have issued.
A. call date
B. maturity date
C. declaration date
D. payable date
11. When a company issues a preferred stock, it usually has a ___-year period when it cannot buy back the preferred stock.
A. two
B. three
C. four
D. five
12. It is the dividend in dollar amount that you can receive from the stock divided by the stock’s current market price.
A. conversion price
B. current yield
C. dividend yield
D. interest rate
13. If interest rates go up, then the secondary market value of a preferred stock ___.
A. also goes up
B. goes down
C. remains constant
D. fluctuates but with no general trend
14. Preferred stocks are perpetual stocks.
A. True
B. False
15. In a cumulative preferred stock, ___.
A. stockholders are given a right to cumulative voting
B. cumulative dividends are paid to the preferred stockholders first before dividends are paid to the common stockholders
C. dividends are accumulated for a stated period of time before they can be claimed by the stockholders
D. all of the above
16. What is a convertible preferred stock?
A. It lets you convert your cash dividend into a stock dividend.
B. It lets you convert your cumulative preferred stock into a noncumulative preferred stock.
C. It lets you convert your preferred stock into a bond.
D. It lets you convert your preferred stock into a common stock.
17. The dividends of an adjustable-rate preferred stock change to try to maintain the secondary market value at or near par.
A. True
B. False
18. It is a preferred stock wherein the shareholders are able to receive higher dividends if the company’s performance is better than anticipated.
A. cumulative preferred stock
B. noncumulative preferred stock
C. participating preferred stock
D. variable-rate security
19. The price at which a convertible preferred stock is converted into a common stock
A. conversion ratio
B. dividend
C. par value
D. parity price
20. The price of the common stock when it rises to its conversion price
A. bond price
B. convertible price
C. parity price
D. rising stock price