When a Company Has Both Common Shares and Preferred Shares,the

question 31

Multiple Choice

When a company has both common shares and preferred shares,the book value per common share is calculated by:

• A) dividing total shareholders' equity less preferred equity by the number of common shares outstanding
• B) dividing the amount in the common shares account by the number of common shares outstanding
• C) dividing total shareholders' equity by the number of common shares outstanding
• D) dividing the amount in the common shares account by the sum of the number of common shares and preferred shares outstanding

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Definitions:

Prudent Investor Rule

Prudent Investor Rule is a legal guideline for fiduciaries that mandates investment strategies should be made as a prudent investor would, considering risk, return, diversification, and the objectives of the trust or beneficiary.

Active Portfolio Management

A strategy where managers make specific investments with the goal of outperforming an investment benchmark index.

Passive Strategy

An investment approach that involves holding a diversified portfolio to match the performance of a market index over time, minimizing buying and selling actions.

After-tax Holding-period Return

The return on an investment after accounting for taxes, over the period it was held, reflecting the true gain or loss.