HKSI Licensing Examination Paper 8 (Securities)

A preference share typically differs from an ordinary share in that a preference share:

1. AUsually pays a fixed dividend and ranks ahead of ordinary shares for dividends and on winding upCorrect
2. BGives its holder an unlimited share of residual profits
3. CRanks behind ordinary shares for dividends
4. DAlways carries full voting rights at company meetings, ranking equally with ordinary shares in every respect

Why: Preference shares usually carry a fixed dividend and rank ahead of ordinary shares for dividends and for capital on a winding up, but they generally have limited or no voting rights and no share in surplus profits.

When a company raises new money by selling shares to the public for the first time, the transaction takes place in the:

1. ADerivatives market
2. BMoney market
3. CSecondary market
4. DPrimary marketCorrect

Why: A primary-market transaction is one in which the issuer itself receives the proceeds, such as an initial public offering (IPO). Once the shares subsequently trade between investors, that trading occurs in the secondary market.