Please answer all questions and make sure your answers are concise! Imagine you are writing a summary to your clients and employer!

Theory questions

• Why do investors invest their money in stocks if bonds are a relatively safer option?

• As an equity investor, would you prefer to invest in stocks that attempt to pay big dividends or those that try t reinvest profits to try to achieve higher stock prices? Why?

• As an equity investor, would you prefer to invest in common or preferred shares? Why?

• Please list the difference between cumulative preferred shares and non-cumulative preferred shares.

• Would common shareholders prefer that the business issue cumulative or non-cumulative preferred shares? Why?

• How would you estimate a company's fair market value if the company does not pay any dividends?