What Is Known as Dilution

question 44

Multiple Choice

What is known as dilution?

• A) The artificial difference between the net asset value (NAV) and the fair value of the securities
• B) An investment technique that involves short-term "in-and-out" trading of mutual fund shares
• C) The loss resulting from "forward pricing" requirements
• D) The harm caused by the transfer of wealth from long-term investors to market timers

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Definitions:

Treasury Stock

Shares once issued and then retrieved by the originating company, lowering the volume of shares trading on the open market.

Par Value

A nominal or face value given to a share of stock or a bond, often used in accounting to determine legal capital or in the issuance of shares.

Common Stock

Type of equity security that represents ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Par Value

A nominal value assigned to shares of stock in a company's charter, not necessarily reflecting market value.