Overview of Equity Securities practice questions

What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Equity Investments

Overview of Equity Securities

A preferred share issue pays fixed dividends, requires missed dividends to be paid before common dividends resume, and allows holders to share in earnings above a specified threshold. The issue is best described as:

Equity Investments

Overview of Equity Securities

A U.S. investor wants exposure to a Japanese company without trading ordinary shares in Japan and without settling in yen. The most appropriate instrument is most likely a:

Equity Investments

Overview of Equity Securities

A company reports book value of equity of USD600 million and market capitalization of USD1.8 billion. Its accounting ROE is 14%, estimated cost of equity is 9%, and investors currently require 11% on comparable risk equity. The most accurate statement is:

Equity Investments

Overview of Equity Securities

Common shares are best described as securities that:

Equity Investments

Overview of Equity Securities

A cumulative preferred share is best described as preferred stock for which:

Equity Investments

Overview of Equity Securities

Under cumulative voting, a shareholder with 100 shares voting on five board seats has a total of how many votes to allocate across candidates?

Equity Investments

Overview of Equity Securities

A company announces a 2-for-1 stock split. Ignoring signaling and market frictions, the immediate mechanical effect is most likely:

Equity Investments

Overview of Equity Securities

An investor in Country A buys a locally traded certificate representing shares of a company listed in Country B. This security is best described as:

Equity Investments

Overview of Equity Securities

A company has 20 million common shares outstanding at a market price of 18 per share. Common shareholders' book equity is 240 million. The company's market capitalization and price-to-book ratio are closest to:

Equity Investments

Overview of Equity Securities

An investor owns 8% of a company before a rights offering. The investor wants to maintain the same ownership percentage. The right most directly protecting this objective is:

Equity Investments

Overview of Equity Securities

Compared with a publicly traded common share, private equity securities most likely have:

Equity Investments

Overview of Equity Securities

A shareholder owns 2,500 shares of a company that is electing four directors in a single election. The maximum number of votes the shareholder can cast for a single candidate under cumulative voting, compared with the maximum possible for a single candidate under statutory voting, is greater by:

Equity Investments

Overview of Equity Securities

A company reports net income of USD 45 million for the year. Common shareholders' equity was USD 280 million at the beginning of the year and USD 320 million at the end of the year. Using average equity, the company's accounting return on equity for the year is closest to:

Equity Investments

Overview of Equity Securities

A convertible preference share most likely gives its holder the right to:

Equity Investments

Overview of Equity Securities

Compared with otherwise identical non-putable common shares of the same issuer, putable common shares most likely:

Equity Investments

Overview of Equity Securities

For securities of a single issuer, which of the following most likely orders the securities from lowest to highest investment risk?

Equity Investments

Overview of Equity Securities

A depositary bank establishes a depository receipt program based on a foreign company's shares without the participation of the foreign company. Holders of these depository receipts most likely:

Equity Investments

Overview of Equity Securities

A company based in an emerging market raises capital from international investors by issuing US dollar-denominated depository receipts that trade on the London and Luxembourg stock exchanges. These securities are best described as:

Equity Investments

Overview of Equity Securities

A publicly listed company that needs financing quickly sells a large block of newly issued common shares directly to a small group of institutional investors at a discount to the current market price. This transaction is best described as:

Equity Investments

Overview of Equity Securities

The market value of a company's common equity is most likely determined by: