Study Question of the Week: December 12, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 24, Series 79, and Series 62. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 24, Series 79, and Series 62):

Which of the following is not true regarding tender offers by third-parties?

Answers:

A: Whenever the bidder purchases or intends to purchase more than 5% of a company’s outstanding shares, it must file Schedule TO

B: While the same price must be given to all shareholders as in an issuer’s offer, third-party offers allow an exclusion for certain severance/benefits packages that have been approved by an employee compensation committee

C: The target firm’s management must communicate a position on the tender offer within 4 business days of the offer

D: All recommendations on the tender offer made by the targeted company, its affiliates, and certain other parties must be made using SEC Form, Schedule 14D-9

Correct Answer: C

Rationale:  The following are tender offer rules relating to third-party tender offers.

–Whenever the bidder purchases or intends to purchase more than 5% of a company’s outstanding shares, it must file Schedule TO. It must also file a Form 13D, which is a beneficial ownership form.
— All recommendations on the tender offer made by (1) the targeted company and its affiliates, (2) shareholders of the target company, the bidder, and affiliates of either, and (3) anyone acting on behalf of the forgoing or on behalf of the bidder must be made using SEC Form, Schedule 14D-9. The bidder does not use Schedule 14D-9 if it has filed Schedule TO.
–While the same price must be given to all shareholders as in an issuer’s offer, third-party offers allow an exclusion for certain severance/benefits packages that have been approved by an employee compensation committee.
–The bidder cannot buy shares outside of the tender offer during the offer period.
–The target firm’s management must communicate a position on the tender offer within 10 business days of the offer. The recommendation can take the form of: (a) accept or reject; (b) remain neutral; or (c) take no position. The target firm’s management must explain why it takes that position. It cannot recommend that shareholders buy shares in the company.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: December 6, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 79, Series 24, Series 62 and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 79, Series 24, Series 62 and Series 82):

An individual or group acting together must file a Schedule 13D form when:

Answers:

A: their stockholdings reach 5% of a corporation’s outstanding shares of common stock

B: their stockholdings reach 10% of a corporation’s outstanding shares of common stock

C: their stockholdings reach 20% of a corporation’s outstanding shares of common stock

D: their stockholdings reach 50% of a corporation’s outstanding shares of common stock

Correct Answer: A

Rationale: Section 13(d) requires an individual or group acting together to file a 13D form when their stockholdings reach 5% of a corporation’s outstanding shares of common stock. This rule gives a corporation that may be the target of an acquisition fair warning in advance. Schedule 13D requires the group to disclose the number of shares owned, background information on the individual filing the form, the purpose of the transaction, and the source of the funds to finance the acquisition of the shares. Schedule 13D must be filed within 10 days of the acquisition of the stock.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: November 27, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 62, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section below.

Question (Relevant to the Series 7, Series 62, and Series 82):

ABC Corporation 6% preferred stock is convertible at $20. ABC Common trades at $25/share. What is the parity price of ABC preferred stock?

Answers:

A: $30

B: $50

C: $125

D: $500

Correct Answer: C

Rationale: First we must take the convertible price and divide it into the par value for the preferred stock to find out how many shares of common stock would be received for one share of preferred stock. $100/$20 = 5 shares of common for each share of preferred. Then we must multiple the number of common shares times the price of the common stock. 5 shares * $25/share = $125/share. The parity price of ABC preferred is $125/share.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: November 8, 2012 Edition

This week’s exam study question from the Solomon Online Exam Simulator question database is now available. This week’s exam question is relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, Series 66, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section below.

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, Series 66, and Series 82):

A couple has just had a baby and they want to start saving for college. What option does NOT offer the opportunity for their investment to grow free of federal taxes?

Answers:

A: Education Savings Account

B: UGMA/UTMA Account

C: 529 College Savings Plan

D: 529 Prepaid Tuition Plan

ANSWER & RATIONALE

Correct Answer: B

Rationale: Unlike the other options, UGMA/UTMA (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act) accounts are subject to federal income and capital gains taxes.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

ANSWER–Study Question of the Week: October 1, 2012 Edition

As a follow up to yesterday’s licensing exam study question (Relevant to Series 65, Series 66, Series 7, and Series 79), here is your question PLUS answer and rationale: Continue reading

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale:

Question (Relevant to Series 65, Series 66, Series 7, and Series 79):

Given the following assumptions for stock ABC, what is its expected return using the Capital Asset Pricing Model (CAPM)?

Assumptions: Risk Free Rate: 1%; Expected Return on general stock market: 7%; Beta: 1.; Sharpe Ratio: 2.

Answers:

A. 10%

B. 13%

C. 11.5%

D. 15%

Correct Answer: A

Rationale: The formula for the Capital Asset Pricing Model (CAPM) is given by the following: Return on Stock = Risk Free Rate + Beta of Stock x (Return on Market – Risk Free Rate). Plugging in for Stock ABC gives Return on Stock ABC = 1% + 1.5 x (7% – 1%) = 10%. Note the Sharpe Ratio is not used in the CAPM formula.

*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: October 1, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available (Relevant to Series 65, Series 66, Series 7, and Series 79). Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale! Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale!

Happy studying!

Question (Relevant to Series 65, Series 66, Series 7, and Series 79): Given the following assumptions for stock ABC, what is its expected return using the Capital Asset Pricing Model (CAPM)?

Risk Free Rate: 1%; Expected Return on general stock market: 7%; Beta: 1.;, Sharpe Ratio: 2.

Answers:

A. 10%

B. 13%

C. 11.5%

D. 15%

Study Question of the Week: September 19, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale! Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale!

Happy studying!

Question (Relevant to Series 7, Series 79, Series 24, Series 62, Series 99, and Series 82):

Before allowing a customer to buy shares in an IPO, the member firm must receive a representation that the account is not restricted by the account owner. How can this form be obtained initially?
I. Negative consent letter
II. Positive affirmation letter

Answers:

A: I

B: II

C: Either I or II

D: Neither I nor II

ANSWER–Study Question of the Week: September 5, 2012 Edition

As a follow up to yesterday’s question, here is your question PLUS answer and rationale: Continue reading

As a follow up to yesterday’s question, here is your question PLUS answer and rationale:

Question (Relevant to Series 7, Series 62, and Series 24):

Sam bought 1,000 shares of XYZ Corporation three months ago and the stock has appreciated significantly over that time. Sam decides to go short against the box. What does this mean?

Answers:

A: Sam has decided to short 1,000 shares of XYZ.

B: Sam has decided to write 10 call options of XYZ stock.

C: Sam has decided to write 10 put options of XYZ stock.

D: Sam has decided to sell his shares of XYZ and then buy the shares back after a 30-day window.

Correct Answer: A

Rationale:

When an investor goes short “against the box” it simply means that the investor has shorted shares that they already own with no intention of delivering their own shares by the settlement date. This practice is called “against the box” because the owned shares are held safely in a box, while borrowed shares are sold. Shorting against the box used to be a common tax deferral strategy. By selling borrowed shares, the investor could defer a capital gain to a more favorable later time. Current tax law no longer permits shorting against the box to be used as a tax deferral strategy – when an investor shorts shares they already own it is treated as if they have sold the shares and the gain is recognized immediately.

*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: September 5, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section! Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.  Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale!

Happy studying!

Question (Relevant to Series 7, Series 62, and Series 24):

Sam bought 1,000 shares of XYZ Corporation three months ago and the stock has appreciated significantly over that time. Sam decides to go short against the box. What does this mean?

Answers:

A: Sam has decided to short 1,000 shares of XYZ.

B: Sam has decided to write 10 call options of XYZ stock.

C: Sam has decided to write 10 put options of XYZ stock.

D: Sam has decided to sell his shares of XYZ and then buy the shares back after a 30-day window.

Solomon Exam Prep Introduces Series 82 Online Exam Simulator

Solomon Exam Prep is pleased to announce our industry-leading online exam simulator for the Series 82!

If you have to take the FINRA Series 82 Private Securities Offerings exam, and want as much practice as possible before you do, then the Solomon Exam Prep online exam simulator is right for you. Continue reading

Solomon Exam Prep is pleased to announce our industry-leading online exam simulator for the Series 82!

If you have to take the FINRA Series 82 Private Securities Offerings exam, and want as much practice as possible before you do, then the Solomon Exam Prep online exam simulator is right for you.

The Exam Simulator features an unlimited number of randomly-generated section quizzes as well as full-length exams, both in timed and untimed modes. New questions are added regularly to the Solomon Exam Prep Series 82 question database, so that you get the best experience possible in this fast-changing industry.

Studies have shown that self-testing is a powerful tool for learning.  It just goes to show that the old saying is true: practice really does make perfect.

Begin practicing for your Series 82 exam with the Solomon Exam Prep Series 82 Online Exam Simulator today!