OACETT CET Certification IEPPE Question # 8 Topic 1 Discussion

Equity securitiesrepresentownership in a company, whiledebt securitiesrepresentloans to the company.

Step-by-Step Explanation:

Types of Securities:

Equity securities– Ownership interests, likecommon and preferred shares.

Debt securities– Loans issued by companies, likebonds and debentures.

Why Preferred Shares Are Equity Securities:

Preferred shareholdersown a portion of the company.

They receivefixed dividendsbutdo not have voting rightslike commonshareholders.

Why Option A Is Correct:

Preferred sharesqualify asequitybecause theyrepresent ownership.

Why Other Options Are Incorrect:

B (Corporate bonds)– Bonds aredebt instruments, not equity.

C (Debentures)– A type ofloan, not ownership.

D (Notes)– Short-termdebt instruments, not equity.