Mike Lively Is Thinking About Buying an Investment That Represents

question 71

Multiple Choice

Mike Lively is thinking about buying an investment that represents an ownership claim on a company.The most important priority he has with this investment is receiving his dividends before dividends are paid on other types of investments.What investment is Mike thinking about purchasing?

• A)Common stock
• B)Preferred stock
• C)Corporate bond
• D)Option
• E)Mutual fund

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Definitions:

Residual Claims

Claims holding a lower priority than other debt obligations, which are entitled to the income or assets of a corporation after all other obligations have been met.

Common Shares

Equity ownership units in a corporation, entitling holders to dividends and voting rights.

Efficient Markets Hypothesis

The theory that all available information is already reflected in stock prices, implying that it is impossible to consistently achieve higher returns.

Semistrong-Form

A theory related to the Efficient Market Hypothesis that asserts all public information is already reflected in stock prices, along with historical information.