Equity Securities
Exam Weight: ~5 questions (4% of exam)
Equity securities represent ownership in a corporation. Unlike bondholders who are creditors, stockholders are owners who participate in the company's success through dividends and capital appreciation. This unit covers the types of equity securities you need to know for the exam: common stock (domestic, foreign, and American Depositary Receipts) and preferred stock (standard, convertible, and floating rate).
Why do you need to know this? Equity securities form the foundation of most client portfolios. Understanding their characteristics helps you recommend appropriate investments based on client risk tolerance and growth objectives. The exam tests your ability to distinguish between different equity types and understand their rights and restrictions.