"Equity Investments":Advantages of convertible preferred stock

下载正保会计网校APP 订阅最新报考消息

来源: 正保会计网校编辑：小鞠橘桔 2020/12/09 14:46:36　字体：大小

学习是一个不断积累的过程，每天学习一点，每天进步一点！为了帮助大家更高效地备考2021年CFA考试，正保会计网校每日为大家上新CFA习题供大家练习。让网校与您一起高效备考2021年CFA考试，梦想成真！

Questions 1:

A trader seeking to sell a very large block of stock for her client will most likely execute the trade in a(n):

A、 quote-driven market.

B、 order-driven market.

C、 brokered market.

Questions 2:

The advantages to an investor owning convertible preference shares of a company most likely include:

A、 less price volatility than the underlying common shares.

B、 an opportunity to receive additional dividends if the company’s profits exceed a pre-specified level.

C 、preference dividends that are fixed contractual obligations of the company.

View answer resolution

【Answer to question 1】C

【analysis】

C is correct. Instruments that are infrequently traded and expensive to carry as inventory (e.g., very large blocks of stock, real estate properties, fine art masterpieces, and liquor licenses) are executed in brokered markets. Organizing order-driven markets for such instruments is not sensible because too few traders would submit orders to them.

A is incorrect. In quote-driven markets (also called price-driven, dealer, or OTC markets) customers trade with dealers, and the instruments traded are mostly bonds, currencies, and spot commodities.

B is incorrect. An order-driven market follows an order matching system run by an exchange or a broker using rules to arrange trades submitted by traders.

【Answer to question 2】A

【analysis】

A is correct. Convertible preference shares tend to exhibit less price volatility than the underlying common shares because the dividend payments are known and more stable.

B is incorrect. An opportunity to receive additional dividend if the company’s profits exceed a pre-specified level is the benefit that accrues to the holders of participating preferred shares, not convertible preference shareholders.

C is incorrect. Preference dividends are fixed but, unlike interest payment on debt, they are not contractual obligations of the company.

成功=时间+方法，自制力是这个等式的保障。世上无天才，高手都是来自刻苦的练习。而人们经常只看到“牛人”闪耀的成绩，其成绩背后无比寂寞的勤奋。小编相信，每天都在勤奋练习，即使是一点点的进步，大家一定可以成为人人称赞的“牛人”。

下一篇："Equity Investments":Primary market tran...