Skip to content

CFA Level I · CFA Level I Exam · Equity Jurisdictions, Classes, and the Voting Process

An investor holds participating preference shares with a 6% fixed dividend. After the fixed preference dividend and a common dividend at the same rate are paid, the company distributes extra profits. The participating feature most likely allows the preference holders to:

Participating preference shares most likely let holders share in additional profit distributions alongside common shareholders, on top of the fixed dividend. Conversion into common shares and redemption at the holder's option are separate features of convertible and putable preference shares.

  1. AConvert into common shares at a set ratio
  2. BRedeem the shares at par at their own option
  3. CShare in the additional distribution with common holdersCorrect

Explanation

Participating preference shares receive the stated dividend and may also share in extra earnings distributed to common holders. Conversion describes convertible shares, and investor-option redemption describes putable shares, which are different features.

Did you get it right without looking?

One question tells you little. A timed set on Equity Jurisdictions, Classes, and the Voting Process shows your real accuracy, how long you take and where you lose marks.

Practise Equity Jurisdictions, Classes, and the Voting ProcessFree diagnostic mock

More Equity Jurisdictions, Classes, and the Voting Process questions