SIE (Securities Industry Essentials) Practice Exam

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To offer shareholders the ability to obtain shares at a fixed price, a corporation issues which of the following?

  1. Bonds

  2. Debentures

  3. Preferred stock

  4. Rights

The correct answer is: Rights

Issuing rights to shareholders gives them the option to purchase shares at a fixed price, known as the exercise price. Rights differ from bonds in that bonds are loans made by investors to the corporation, while rights give existing shareholders the opportunity to increase their ownership in the company. Debentures, like bonds, are a form of debt that can be issued by a corporation. Preferred stock, on the other hand, represents ownership in a corporation and does not offer the option to purchase additional shares at a fixed price.

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