SIE EXAM COVERS TYPES OF PREFERRED SHARES. CAN YOU ANSWER THIS SAMPLE QUESTION?
How familiar are you with preferred shares and the different classes or types of preferreds? The Securities Industry Essentials (SIE) exam asks about preferred shares, Therefore do not go into the SIE exam without first becoming thoroughly familiar with this subject.
Here's one of Bob Eder's own questions. Can you answer it correctly?
Larry purchases 100 shares of preferred stock issued by XYZ Corp. The shares are "cumulative preferreds." Each share carries a dividend rate of three dollars ($3.00). XYZ Corp. has not paid any dividends on these cumulative preferred shares for the last two years. How much must XYZ Corp. pay on the preferred shares for the current year if it wishes to pay a dividend on its common shares.
a. $3.00 per share
b. $6.00 per share
c. $9.00 per share
d. $12.00 per share
The answer is (c). A cumulative preferred means that the issuing company, such as XYZ Corp., may not pay any dividends on its common shares unless it first makes up any dividends in arrears. XYZ's cumulative preferred shares are in arrears for the last two years in dividends. Thus, XYZ Corp. must pay all arrears, in this case, $6.00 per share. It must also pay the current year's dividend of $3.00, for a grand total of $9.00 per share, before it may may pay any dividends to its common shares.
If you are fuzzy about preferred shares, meaning that you are unable to confidently explain, for example, the different types of preferred shares and their characteristics, then you need to do more study preparation.
Bob Eder J.D.'s book Study for the Securities Industry Essentials (SIE) Exam covers preferred shares in detail with practice questions and real-life examples. It is available from Amazon in both paperback and Kindle e-book versions.
Here is the link to Bob Eder's book on Amazon.
Here is the link to FINRA's Study Outline for the SIE exam. Note section number 2.1.1 that mentions preferred shares in FINRA's Content Outline.
Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. He is
Here's one of Bob Eder's own questions. Can you answer it correctly?
Larry purchases 100 shares of preferred stock issued by XYZ Corp. The shares are "cumulative preferreds." Each share carries a dividend rate of three dollars ($3.00). XYZ Corp. has not paid any dividends on these cumulative preferred shares for the last two years. How much must XYZ Corp. pay on the preferred shares for the current year if it wishes to pay a dividend on its common shares.
a. $3.00 per share
b. $6.00 per share
c. $9.00 per share
d. $12.00 per share
The answer is (c). A cumulative preferred means that the issuing company, such as XYZ Corp., may not pay any dividends on its common shares unless it first makes up any dividends in arrears. XYZ's cumulative preferred shares are in arrears for the last two years in dividends. Thus, XYZ Corp. must pay all arrears, in this case, $6.00 per share. It must also pay the current year's dividend of $3.00, for a grand total of $9.00 per share, before it may may pay any dividends to its common shares.
If you are fuzzy about preferred shares, meaning that you are unable to confidently explain, for example, the different types of preferred shares and their characteristics, then you need to do more study preparation.
Bob Eder J.D.'s book Study for the Securities Industry Essentials (SIE) Exam covers preferred shares in detail with practice questions and real-life examples. It is available from Amazon in both paperback and Kindle e-book versions.
Here is the link to Bob Eder's book on Amazon.
Here is the link to FINRA's Study Outline for the SIE exam. Note section number 2.1.1 that mentions preferred shares in FINRA's Content Outline.
Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. He is
Comments
Post a Comment