SIE (Securities Industry Essentials) Practice Exam

Pre-emptive Rights and Stock Warrants have a number of similarities. Which of the below represent characteristics these products have in common?

1. Each has a fixed price at which the holder may purchase shares

2. The fixed exercise price is below current market value

3. Tradable on securities exchanges

4. Both A and C

The correct answer is: Both A and C

Pre-emptive rights and stock warrants are both types of investment products that involve purchasing shares of a company. They have a number of similarities, but the most important one is that they both have a fixed price at which the holder can purchase shares. This means that the holder is guaranteed to be able to purchase shares at a specific price, regardless of any changes in the market value of the shares. Option A is incorrect because it only mentions one characteristic of these products, which is the fixed price at which the holder can purchase shares. Option B is also incorrect because it only mentions the exercise price, but does not mention the fixed price aspect. Option C is incorrect because it only mentions the tradability of these products and does not mention the fixed price aspect. Option D is the correct answer because it combines the fixed price characteristic (mentioned in option A) and the tradability characteristic (mentioned in option C). By combining these two features, option D provides a more complete and accurate representation of the similarities between pre-emptive rights and stock warrants.