Finra Exam Series-7 Topic 6 Question 89 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 89
Topic #: 6

The preferred stock of Greatest Technology Corporation has a $100 par and is convertible into four shares of common stock. The preferred is trading at 104.50. The preferred is callable at 101. If the common stock price is presently 27.89, which of the following actions would be a successful arbitrage:

Apurchase 400 shares of common stock and sell 100 shares of preferred stock as ''short exempt'' (that is, the sale is exempt from the uptick rule)

Bpurchase the preferred stock and sell an appropriate amount of the common stock ''short exempt''

Cpurchase both the common and the preferred stocks as a hedge against further market risk

Dpurchase the preferred stock and let it be called, which is inevitable at these market prices

Show Suggested Answer

Suggested Answer: A

$0.45. Since treasury stock does not receive dividends, divide $450,000 by the outstanding 100,000 shares to arrive at $0.45 per share.

by Lacey at Jun 02, 2024, 11:45 PM

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Louisa

3 days ago

I disagree, I believe the answer is A.

upvoted 0 times

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Emmett

6 days ago

I think the answer is B.

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