CMFAS Securities Products M2

Question 1

What is an ordinary share?

Accepted Answer

An ownership stake in a company with voting rights

Answer

An ordinary share (common stock) represents an ownership interest in a company. Holders have voting rights and may receive dividends.

Question 2

What is a bond?

Accepted Answer

A debt instrument where the issuer promises to repay the principal with interest

Answer

A bond is a fixed-income debt instrument where the issuer borrows money from investors and agrees to pay interest and return the principal at maturity.

Question 3

What is the difference between a market order and a limit order?

Accepted Answer

A market order executes immediately at the best available price; a limit order specifies a price

Answer

A market order executes immediately at the current best available price, while a limit order only executes at the specified price or better.

Question 4

What is a preference share?

Accepted Answer

A share that has priority over ordinary shares for dividends and asset distribution

Answer

Preference shares have priority over ordinary shares for dividend payments and claims on assets during liquidation, but typically carry limited or no voting rights.

Question 5

What is an initial public offering (IPO)?

Accepted Answer

The first time a company offers its shares to the public

Answer

An IPO is when a private company first offers its shares to the public through a listing on a stock exchange.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Securities Products M2