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Finra Exam Series-7 Topic 6 Question 89 Discussion

Actual exam question for Finra's Series-7 exam
Question #: 89
Topic #: 6
[All Series-7 Questions]

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:

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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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Heike
2 months ago
What do you call a stock that can't make up its mind? A flip-flop! Anyway, I think I'll go with option B. Let's do this!
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Cary
2 months ago
Hold up, is that a pun I see? 'Short exempt'? Haha, these exam questions are getting more creative every year!
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Elbert
2 months ago
Ooh, this is a tricky one! I think I'll go with option B. Gotta love that arbitrage opportunity!
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Stevie
1 months ago
I'm not sure about option C or D, they don't seem like good arbitrage strategies.
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Zachary
2 months ago
I think option A could also work well in this situation.
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Stephaine
2 months ago
I agree, option B seems like the best choice for arbitrage.
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Eladia
3 months ago
I'm not sure about the 'short exempt' rules, so I think I'll play it safe with option C. Can't go wrong with a good ol' hedge, right?
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Jettie
29 days ago
I agree with you on option C. It's always good to hedge against market risk.
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Esteban
1 months ago
I'm leaning towards option A. Buying 400 shares of common stock and selling 100 shares of preferred stock sounds like a solid plan.
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Loren
2 months ago
I think I'll go with option B. Buying the preferred stock and selling the common stock short seems like a good move.
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Dorcas
2 months ago
Option C sounds like a safe bet. Hedging is always a good strategy.
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Anisha
3 months ago
The preferred stock is trading at a premium to its call price, so option D is the way to go. Guaranteed profit and no risk!
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Shawnna
2 months ago
D) purchase the preferred stock and let it be called, which is inevitable at these market prices
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Luis
3 months ago
A) purchase 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)
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Emmett
3 months ago
But selling short exempt can lead to successful arbitrage in this scenario.
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Louisa
3 months ago
I disagree, I believe the answer is A.
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Emmett
4 months ago
I think the answer is B.
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