SIE practice questionmediumPreemptive Rights
Why are preemptive rights valued by shareholders?
- AThey confer automatic board seats
- BThey guarantee higher dividend rates
- CThey prevent dilution of ownership when new shares are issued✓ Correct answer
- DThey allow conversion to preferred stock
Explanation
Why C — They prevent dilution of ownership when new shares are issued
Preemptive rights protect shareholders from dilution during new issuances. They do not assure higher dividends, board positions, or conversion.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Equity Securities questions
- A potential disadvantage for holders of callable preferred stock is:
- In a reverse 1-for-4 stock split, an investor holding 400 shares will now hold how many shares?
- Which of the following statements about common stock is correct?
- Warrants are often issued in connection with which type of securities to make them more attractive?
- An investor holds 100 shares of $100 par, 6% convertible preferred stock, convertible at $20. If the market price of…
- A company’s P/E ratio is often used by analysts to:
- A company has $5 million in assets, $1 million in liabilities, and $500,000 in preferred stock. With 100,000 common…
- Which of the following is NOT a right of common shareholders?