Equity Securities: Rapid Fire
Chapters in this video
- 0:00 Common stock: ownership, voting, and liquidation last
- 1:22 The dividend guarantee trap, then ADRs and currency risk
- 3:12 Preferred stock: fixed rate, floating rate, and the equity-not-debt test
- 4:18 Convertible preferred math: ratio, price, and the higher-value rule
- 5:50 Dividends-received deduction (DRD): 50%, 65%, 100% tiers
- 7:11 Rapid-fire exam recap
What this video covers
- Why common stockholders are last in liquidation order, and how that translates to highest risk with unlimited upside capped only by total loss of investment
- How the board's full discretion over common dividends makes them never guaranteed, even in record-profit scenarios
- What American Depositary Receipts (ADRs) do and do not do: trading convenience in U.S. dollars on U.S. markets, but no elimination of underlying foreign currency risk
- Why fixed-rate preferred stock behaves like a bond when interest rates move, and how floating-rate preferred breaks that sensitivity pattern
- The critical equity-not-debt distinction for preferred stock: no maturity, dividends not deductible by issuer, and skipped dividends are not defaults
- How to calculate conversion price, conversion value (parity), and why convertible preferred always trades at the higher of investment value or conversion value
- The dividends-received deduction (DRD) ownership tiers: 50% under 20%, 65% at 20% or more but less than 80%, and 100% for affiliated-group members at 80% or more
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 66 course also includes adaptive practice questions and spaced-repetition flashcards.