©FYNDLAY 2024/2025 ALL RIGHTS RESERVED 8:10PM.
AFM 121 Final Exam Questions And
Answers 2025 Update.
What are preferred shares - Answer✔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? - Answer✔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? - Answer✔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? - Answer✔Shareholders will receive the dividend amount.
What is a stock dividend? - Answer✔The company decides to issue a stock, rather than cash
What is a DRIP? - Answer✔Divident Reinvestment Plan
The investor decides to receive stock, rather than a cash dividend
What is multi-voting shares? - Answer✔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? - Answer✔Yes
How much do capital gains get taxed? - Answer✔50%
1
, ©FYNDLAY 2024/2025 ALL RIGHTS RESERVED 8:10PM.
What is a stock's 'close'? - Answer✔Last trading price of the day
What is a stock's 'change'? - Answer✔Change from previous day's close
What is a stock's 'volume'? - Answer✔# of shares traded during the period
Which type of dividends are paid first? - Answer✔Preferred then common
Are dividend payments obligatory? (like interest payments) - Answer✔No
How are preferreds valued? - Answer✔PV of future cash flows
Do preferreds have maturity date? - Answer✔No
Why is yield so important? - Answer✔If you receive $5 dividend for Co. A and a $2 dividend
from Co. B, which is better?
If Co. A trades for $50 - dividend yield = $5/$50 = 10%
If Co. B trades for $10 - dividend yield = $2/$10 = 20%
What are convertible preferreds? - Answer✔Convertible into common shares at a premium to
the converted value of the common shares
What is a convertible preferreds 'payback'? - Answer✔# of years to pay back the % conversion
premium
What are retractable preferreds? - Answer✔Preferreds that can be sold back to the issuer by
the investor
What are variable or floating rate preferreds? - Answer✔Dividends vary with interest rates
What are preferreds with warrants? - Answer✔Warrants (a security to buy the common shares
at a fixed price) provide a sweetner for investors
What are foreign-pay preferreds? - Answer✔Dividends paid in foreign currency
What are auction preferreds? - Answer✔Dividend is determined by an auction between issuer
and investors
What are deferred preferreds? - Answer✔Dividends are not paid until a specific maturity date
What are callable preferreds? - Answer✔Preferreds that can be called by the issuers at a
premium over the par value
How are stock indexes weighted? - Answer✔Typically value weighted. Each stock in the index is
weighted according to its equity value / market capitalization
2
AFM 121 Final Exam Questions And
Answers 2025 Update.
What are preferred shares - Answer✔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? - Answer✔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? - Answer✔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? - Answer✔Shareholders will receive the dividend amount.
What is a stock dividend? - Answer✔The company decides to issue a stock, rather than cash
What is a DRIP? - Answer✔Divident Reinvestment Plan
The investor decides to receive stock, rather than a cash dividend
What is multi-voting shares? - Answer✔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? - Answer✔Yes
How much do capital gains get taxed? - Answer✔50%
1
, ©FYNDLAY 2024/2025 ALL RIGHTS RESERVED 8:10PM.
What is a stock's 'close'? - Answer✔Last trading price of the day
What is a stock's 'change'? - Answer✔Change from previous day's close
What is a stock's 'volume'? - Answer✔# of shares traded during the period
Which type of dividends are paid first? - Answer✔Preferred then common
Are dividend payments obligatory? (like interest payments) - Answer✔No
How are preferreds valued? - Answer✔PV of future cash flows
Do preferreds have maturity date? - Answer✔No
Why is yield so important? - Answer✔If you receive $5 dividend for Co. A and a $2 dividend
from Co. B, which is better?
If Co. A trades for $50 - dividend yield = $5/$50 = 10%
If Co. B trades for $10 - dividend yield = $2/$10 = 20%
What are convertible preferreds? - Answer✔Convertible into common shares at a premium to
the converted value of the common shares
What is a convertible preferreds 'payback'? - Answer✔# of years to pay back the % conversion
premium
What are retractable preferreds? - Answer✔Preferreds that can be sold back to the issuer by
the investor
What are variable or floating rate preferreds? - Answer✔Dividends vary with interest rates
What are preferreds with warrants? - Answer✔Warrants (a security to buy the common shares
at a fixed price) provide a sweetner for investors
What are foreign-pay preferreds? - Answer✔Dividends paid in foreign currency
What are auction preferreds? - Answer✔Dividend is determined by an auction between issuer
and investors
What are deferred preferreds? - Answer✔Dividends are not paid until a specific maturity date
What are callable preferreds? - Answer✔Preferreds that can be called by the issuers at a
premium over the par value
How are stock indexes weighted? - Answer✔Typically value weighted. Each stock in the index is
weighted according to its equity value / market capitalization
2
