IFoA SP5 Practice Questions - IFoA SP5 Investment And Finance Specialist Principles Exam

Which characteristic best distinguishes ordinary shares (equities) from conventional bonds as an asset class?

Ordinary shares give a fixed contractual income, whereas bonds pay a variable dividend Ordinary shares rank behind bondholders on a winding-up and have no fixed redemption date Ordinary shares are always secured on company assets, whereas bonds are unsecured Ordinary shares carry a legal obligation for the company to pay an annual coupon

Correct Answer:

Ordinary shares rank behind bondholders on a winding-up and have no fixed redemption date

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