AFM 121 FINAL EXAM 2025 | ALL QUESTIONS
AND CORRECT ANSWERS
CLEAN A 1/1/25 Exam
,AFM 121 FINAL EXAM
AFM 121 FINAL EXAM 2025 | ALL
QUESTIONS AND CORRECT ANSWERS
What are preferred shares - Provides cash payments/dividends
These payments/dividends are fixed; hence, preferred shares are often viewed as
fixed income not equity
Most attractive to investor who wants a steady income
What is a stock split? - A company splits its shares thereby doubling (or tripling) its
shares outstanding (in a 2 for 1 stock split, the share price is halved)
Note****A stock split does not increase a company's market capitlization
What happens on ex. dividend date? - You must purchase a stock BEFORE the ex.
dividend date to receive the next dividend payment. On this date, the stock price
declines by the amount the dividend is being paid is.
What happens on the record date? - Shareholders will receive the dividend amount.
What is a stock dividend? - The company decides to issue a stock, rather than cash
What is a DRIP? - Divident Reinvestment Plan
AFM 121 FINAL EXAM
, AFM 121 FINAL EXAM
The investor decides to receive stock, rather than a cash dividend
What is multi-voting shares? - Each share they own comes with it 10 votes instead
of 1 share for 1 vote for restricted voting shares
Do dividends receive a tax credit? - Yes
How much do capital gains get taxed? - 50%
What is a stock's 'close'? - Last trading price of the day
What is a stock's 'change'? - Change from previous day's close
What is a stock's 'volume'? - # of shares traded during the period
Which type of dividends are paid first? - Preferred then common
Are dividend payments obligatory? (like interest payments) - No
How are preferreds valued? - PV of future cash flows
Do preferreds have maturity date? - No
Why is yield so important? - If you receive $5 dividend for Co. A and a $2
dividend from Co. B, which is better?
AFM 121 FINAL EXAM
AND CORRECT ANSWERS
CLEAN A 1/1/25 Exam
,AFM 121 FINAL EXAM
AFM 121 FINAL EXAM 2025 | ALL
QUESTIONS AND CORRECT ANSWERS
What are preferred shares - Provides cash payments/dividends
These payments/dividends are fixed; hence, preferred shares are often viewed as
fixed income not equity
Most attractive to investor who wants a steady income
What is a stock split? - A company splits its shares thereby doubling (or tripling) its
shares outstanding (in a 2 for 1 stock split, the share price is halved)
Note****A stock split does not increase a company's market capitlization
What happens on ex. dividend date? - You must purchase a stock BEFORE the ex.
dividend date to receive the next dividend payment. On this date, the stock price
declines by the amount the dividend is being paid is.
What happens on the record date? - Shareholders will receive the dividend amount.
What is a stock dividend? - The company decides to issue a stock, rather than cash
What is a DRIP? - Divident Reinvestment Plan
AFM 121 FINAL EXAM
, AFM 121 FINAL EXAM
The investor decides to receive stock, rather than a cash dividend
What is multi-voting shares? - Each share they own comes with it 10 votes instead
of 1 share for 1 vote for restricted voting shares
Do dividends receive a tax credit? - Yes
How much do capital gains get taxed? - 50%
What is a stock's 'close'? - Last trading price of the day
What is a stock's 'change'? - Change from previous day's close
What is a stock's 'volume'? - # of shares traded during the period
Which type of dividends are paid first? - Preferred then common
Are dividend payments obligatory? (like interest payments) - No
How are preferreds valued? - PV of future cash flows
Do preferreds have maturity date? - No
Why is yield so important? - If you receive $5 dividend for Co. A and a $2
dividend from Co. B, which is better?
AFM 121 FINAL EXAM
