Question

In: Finance

The majority of companies listed on an exchange pay dividends . true or false DRIPs result...

The majority of companies listed on an exchange pay dividends .
true or false
DRIPs result in being able to purchase additional shares without paying commission . ) True ) False
Laddering helps to smooth out the impact of interst rate fluctuations and prevents drastic changes to the earnings generated by your fixed - income portfolio . A True False
Question For an investor striving to achieve a good return at a very modest risk , preferred shares are a useful investment . " ) True B ) False
Due to the growth effect of inflation on purchasing power , savers and investors must adjust their long - term objectives to compensate for inflation's drag on future values . ) True B ) False
" Different tax treatments on investments , and their impact on returns , should always be considered when deciding where to hold investments . " A) True B ) False

Solutions

Expert Solution

a) True.

shareholders of a company expects something in return for the risk he is taking by investing in the company. Therefore the company is entitled to provide profits as dividend.

b) True

Dividend reinvestment plan helps the shareholders to reinvest into additional shares or fractional shares of the stock. DRIP doesn't carry commission.

c) true

Laddering attempts to mitigate interest rate risk using the combination of short term and long term bonds for enhanced yields. This strategy takes the "guess" out of predicting future interest rate yet offer partial Hegde to future rate fluctuations

d) True

Preferred stock is a mixture of equity and dividend. Preferred stock always carry a fixed percentage of dividend and at the same time it is not at all risky as the equity shares. Hence an investor who assumes modest risk can prefer preferred stock.

e) True

Because inflation decreases the value of investment return over time, investors should take their investment to markets with lower inflation. But there are certain inflation protected securities. investing is such securities can save the total investment. Inflation indexed Bonds , Teasury inflation - protected securities (TIPS)

F) True

Before making a genuine investment the investor should go through the characteristics of that particular investment. Achieving maximum return will be the goal of every investor. For that purpose it is important to know different impact on return


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