S-12 Securities Products and Markets 2

Question 1

A preferred stock that allows unpaid dividends to accumulate before common stockholders receive any dividends is called:

Accepted Answer

Cumulative preferred

Answer

Cumulative preferred stock requires that all unpaid past dividends (arrears) be paid to preferred shareholders before common shareholders can receive any dividends.

Question 2

The spread between the bid price and ask price of a security is known as the:

Accepted Answer

Bid-ask spread

Answer

The bid-ask spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask), representing the market maker's compensation.

Question 3

Under the Securities Act of 1933, which type of offering is exempt from full SEC registration requirements?

Accepted Answer

Regulation D private placements

Answer

Regulation D provides exemptions from SEC registration for private placements, which are sales to accredited investors and a limited number of sophisticated buyers without a public offering.

Question 4

A bond trading at a price below its par value is said to be trading at a:

Accepted Answer

Discount

Answer

When a bond's market price is below its face (par) value—typically $1,000—it is trading at a discount, usually because prevailing interest rates have risen above the bond's coupon rate.

Question 5

Which index measures the performance of 500 large-cap U.S. companies and is widely used as a benchmark for the U.S. equity market?

Accepted Answer

S&P 500

Answer

The S&P 500 tracks 500 large-capitalization U.S. stocks selected by a committee and is considered one of the most representative benchmarks of U.S. equity market performance.

S-12 Test Practice Test

S-12 Test Practice Test

S-12 Securities Products and Markets 2