Chapter 8 Equity Securities: Common and Preferred Shares KT

Question 1

A preferred share that may be redeemed upon due notice by the security’s issuer.

Answer 1

A preferred share that may be redeemed upon due notice by the security’s issuer.

callable preferred

Question 2

The automatic reinvestment of shareholder dividends in more shares of the company’s stock.

Answer 2

dividend reinvestment plan

Question 3

Interest or dividends that were not paid when due but are still owed.

Answer 3

arrears

Question 4

Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time with a goal of reducing average cost paid per unit.

Answer 4

dollar cost averaging

Question 5

A legal term meaning that all securities within a series have equal rank or claim on earnings and assets. Usually refers to equally ranking issues of a company’s preferred shares.

Answer 5

pari passu

Question 6

An increase in a corporation’s number of shares outstanding without any change in the shareholders’ equity or market value.

Answer 6

stock split

Question 7

The part of the issued shares that are outstanding and available for trading by the public, and not held by company officers, directors, or investors who hold a controlling interest in the company.

Answer 7

float

Question 8

Securities certificates that are registered in the name of the securities firm, rather than the beneficial owner.

Answer 8

street certificate

Question 9

Shares that participate in a company’s earnings and assets (in liquidation), as common shares do, but generally have restrictions on voting rights or else no voting rights.

Answer 9

restricted shares

Question 10

A preferred share that grants the holder the option under specified conditions to force the issuer to redeem the shares.

Answer 10

retraction

Question 11

A retraction feature that allows the issuer to redeem retracted shares either for cash or common shares.

Answer 11

soft retraction

Question 12

What results when an investor sells a security for more than its purchase price?

Answer 12

capital gain

Question 13

The arithmetic average of the current prices of a group of stocks designed to represent the overall market or some part of it.

Answer 13

stock average

Question 14

A number of shares which is less than a standard trading unit. Usually refers to a securities trade for less than 100 shares

Answer 14

odd lot or broken lot

Question 15

If you buy shares during this period of time, you will receive an upcoming already-declared dividend.

Answer 15

cum dividend

Question 16

The trading unit which has uniformly been decided upon by the stock exchanges; in most cases it is 100 shares, but this can vary depending on the price of the stock.

Answer 16

standard trading unit

Question 17

A time series of numbers used to calculate a percentage change of a portfolio of shares over any period of time.

Answer 17

stock index

Question 18

The period of time after the cum dividend period where, when a person purchases a common or preferred share, they are not entitled to the declared dividend payment.

Answer 18

ex-dividend