Canadian Securities Course (CSC) Practice Exam

What advantages are associated with common shares?

1. Potential for high interest rates

2. Guaranteed dividends

3. Fixed return

4. Potential for capital appreciation, dividends, voting rights, limited liability, and marketability

The correct answer is: Potential for capital appreciation, dividends, voting rights, limited liability, and marketability

Common shares offer multiple advantages, including potential for capital appreciation, dividends, voting rights, limited liability, and marketability. This means that investors can potentially see their investment grow in value over time, receive a portion of the company's profits as dividends, have a say in important company decisions through voting rights, and have limited liability for any losses the company may experience. In contrast, options A, B, and C do not accurately describe the potential advantages of common shares. Option A mentions "high interest rates," which are typically associated with fixed income investments such as bonds, not common shares. Option B suggests that dividends are guaranteed, which is not always the case for common shares as they are dependent on the company's profitability and decision to issue dividends. Option C mentions a "fixed return," which is not an inherent characteristic of common shares as their value can fluctuate.