Finance and Investment Quiz

What is a feature of common stock?

• Fixed dividend payments

• Priority in asset distribution

• Voting rights in company decisions

• No market risk

How do ordinary shareholders benefit from a company's success?

• Through fixed salaries

• Via dividends and share appreciation

• By receiving company products

• Through tax deductions

If a company has a dividend yield of 2%, what does this imply?

• The company pays 2% of its earnings as dividends

• The company pays 2% of its share price as dividends

• The company pays 2% of its market capitalization as dividends

• The company pays 2% of its total revenue as dividends

If an investor buys a share for £3 and sells it for £5, what is the capital gain?

• £1

• £2

• £3

• £5

How is an unrealized gain described?

• A gain that has been sold

• A gain that has not been sold

• A gain that is taxed

• A gain that is lost

What happens to the capital gain if the share price falls before selling?

• The capital gain increases

• The capital gain remains the same

• The capital gain decreases

• The capital gain is unaffected

What is the term for profits made from the increase in share prices over time?

• Dividends

• Capital gains

• Interest

• Fees

How do pre-emptive rights protect existing shareholders?

• By allowing them to sell shares at a premium

• By giving them the right to subscribe for new shares

• By ensuring they receive dividends first

• By increasing their voting power

What type of risk involves the difficulty of selling shares quickly without affecting the price?

• Price and Market Risk

• Liquidity Risk

• Issuer Risk

• Foreign Exchange Risk

What is price risk?

• The risk that share prices might rise.

• The risk that share prices might fall.

• The risk that dividends will increase.

• The risk that interest rates will drop.