Multiple Choice

1. A call on shares occurs when

a) A share-broker requests shareholders to pay money that is owing on shares

b) The share market requests shareholders to pay money that is owing on shares

c) An individual seller of shares requests the buyer to pay for shares purchased

d) A company's directors request shareholders to pay money that is owing on shares

2. Choose the incorrect statement in regard to interim dividends

a) They are paid partway through (after the middle) the company's financial year

b) They are called interim because they are paid out between a changeover of directors

c) They are usually based on mid-year (six-monthly) results for the company

d) They should not be paid out if the company fails its solvency test

3. Choose the correct statement.

The strike price for a dividend election plan is calculated by:

a) Taking the lowest market price a few days near to the date the election plan is being decided, less any discount that may be given

b) Taking the highest market price a few days near to the date the election plan is being decided, less any discount that may be given

c) Calculating the average market price a few days near to the date the election plan is being decided, and adding any discount that may be given

d) Calculating the average market price a few days near to the date the election plan is being decided, and deducting any discount that may be given

4. Choose the incorrect statement in regard to bonus share issues

a) Have the benefit of enabling the company to distribute tax-free capital gains to existing shareholders

b) Avoid problems associated with alternative distributions that involve cash flow

c) Involve the issue of partly paid-up shares to existing shareholders, in proportion to the shares they currently hold

d) Whether a bonus share issue is tax free is determined by the company and depends on the source of the issue

5. A call option

a) Is a contract giving rights to sell shares at a non-fixed price at a future date

b) Would be most likely to be exercised if on the option date, the market price is higher than the set call option price

c) Would be most likely to be exercised if on the option date, the market price is lower than the set call option price

d) Is a contract giving rights to buy shares at a non-fixed price at a future date