TEST TOPIC ALERTS - Unit 1: Types and Characteristics of Equity Securities: EQUITY SECURITIES

Question 1

Characteristics of Equity Securities: Preferred Stock

Like common stock, preferred stock represents ownership in a company, but its price reacts to the market more like (A) because, (B).

Answer 1

A. a bond

B. with its fixed dividend payment, it is price sensitive to interest rate changes

Question 2

Common Stock Features: Rights of Stockholders

Prior to a vote or a payment of dividend, the company establishes a (A).

This is the date by which (B) in order to vote or receive the announced dividend.

Answer 2

A. record date

B. an investor must be an owner of record (shown as an owner on the company’s records)

Question 3

Different types of Preferred Stock: Cumulative Preferred

An investor seeking steady income would find (fill in the blank) to be the most suitable of the different types of preferred stock.

Answer 3

cumulative preferred stock

Question 4

Different types of Preferred Stock: Adjustable-Rate Preferred

For investors looking for fixed income through preferred stocks, (fill in the blank)

would be their least appropriate choice because (fill in the blank)

Answer 4

1. adjustable rate
2. the dividend will likely fluctuate.

Question 5

Different types of Preferred Stock: Adjustable-Rate Preferred

Because the primary objective met by investing in preferred stock is income, when analyzing a specific preferred stock, the most important determination should be…

Answer 5

the ability of the company to meet its dividend payments.

Question 6

Foreign Equity Securities: Risk of ADRs (American Depositary Receipts)

The exam will want you to know that ADRs are issued by (fill in the blank)

and that, even though they are traded in U.S. dollars, they still bear (fill in the blank)

Answer 6

domestic branches of U.S. banks

currency risk