Certtf - Study Session 8

Front 1

The principal instruments in equity markets are:

Back 1

1. ordinary shares

(also: (common) stock; most common form of equity)

2. preference shares

3. hybrids

Front 2

The main benefits of equity markets are:

Back 2

1. allow companies to raise money to invest and grow

2. allow investors to find companies needing investment

3. determine fair prices for equities

Front 3

A rational investor prefers:

Back 3

1. more return for the same risk

2. prefers less risk for the same return

Front 4

Ordinary shares give owners:

Back 4

1. the right to dividends, when they are declared by the company

2. the right to vote at general meetings of the company

3. the right to share in any residual value on winding-up of the company, after all other creditors have been paid

Front 5

Ordinary shares are the _ _ _ of the business

Back 5

core risk capital (because they are not guaranteed any dividend or residual value on winding-up)

Front 6

The most common forms of preference shares are:

Back 6

1. the right to a fixed dividend, if there are distributable profits

2. the right to repayment of their nominal value on winding-up after all other creditors but before ordinary shareholders

3. a limited right to vote at general meetings

Front 7

Preference shares can be:

Back 7

1. cumulative or non-cumulative

2. redeemable or non-redeemable

3. convertible or non-convertible

Front 8

Hybrids are a mixture of:

Back 8

equity and debt

Front 9

The most common hybrid is:

Back 9

the convertible bond