Exercise
Answer true or false.
1. _____ For equity investors, potential gains equal potential losses.
2. _____ The right of limited liability applies to only preferred stockholders of a corporation.
Answer the following questions.
3. Put the following dates in the correct order in time:
I. Ex-date
II. Declaration date
III. Payment date
IV. Record date
A. I, II, III, IV
B. II, I, IV, III
C. II, IV, III, I
D. IV, I, II, III
4. If an investor wants to be eligible for a dividend previously declared with a record date of Friday, June 13, by what date should she purchase the common stock, and what is the ex-dividend date?
A. Purchase by Monday, June 9; ex-date Tuesday, June 10
B. Purchase by Wednesday, June 11; ex-date Thursday, June 12
C. Purchase by Tuesday, June 10; ex-date Tuesday, June 10
D. Purchase by Tuesday, June 10; ex-date Wednesday, June 11
Answers
1. False. For equity investors, upside potential is theoretically unlimited, while downside risk