CFA Level I · CFA Level I Exam · Equity Jurisdictions, Classes, and the Voting Process
A company has 6,000,000 Class A shares with one vote each and 1,000,000 Class B shares with five votes each. An investor owns 600,000 Class A shares and no Class B shares. Her percentage of total voting power is closest to:
Her voting power is closest to 5.0%. Total votes are 6,000,000 plus 5,000,000, or 11,000,000, and she holds 600,000 votes, which is about 5.45%. Using share count alone gives 8.6%, and using only Class A shares gives 10.0%, both of which ignore the extra votes.
- A5.0%Correct
- B8.6%
- C10.0%
Explanation
Total votes = 6,000,000 + 1,000,000 × 5 = 11,000,000. Her votes = 600,000, so voting power = 600,000/11,000,000 = 5.45%, which is closest to 5.0%. Her economic ownership is 600,000/7,000,000 = 8.6%, a distractor from ignoring the multiple votes. Counting only Class A shares gives 10.0%.
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