Preferred stockholders are promised a fixed periodic

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Unformatted text preview: (1/2 $90) for 20 years, plus the $1,000 par value at the end of year 20. As noted earlier, shares of common stock are units of ownership, or equity, in a corporation. Common stockholders earn a return by receiving dividends— periodic distributions of earnings—or by realizing increases in share price. Preferred stock is a special form of ownership that has features of both a bond and common stock. Preferred stockholders are promised a fixed periodic dividend that must be paid prior to payment of any dividends to common stockholders. In other words, preferred stock has “preference” over common stock. Preferred and common stock are described in detail in Chapter 7. Major Securities Exchanges securities exchanges Organizations that provide the marketplace in which firms can raise funds through the sale of new securities and purchasers can resell securities. Securities exchanges provide the marketplace in which firms can raise funds through the sale of new securities and purchasers of securities can easily resell them when necessary. Many people call securities exchanges “stock markets,” but this label is misleading because bonds, common stock, preferred stock, and a variety of other investment vehicles are all traded on these exchanges. The two key types of securities exchanges are the organized exchange and the over-thecounter exchange. In addition, important markets exist outside the United States. organized securities exchanges Tangible organizations that act as secondary markets where outstanding securities are resold. Organized Securities Exchanges Organized securities exchanges are tangible organizations that act as secondary markets where outstanding securities are resold. Organized exchanges account for about 46 percent of the total dollar volume of domestic shares traded. The best-known organized exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX), 26 PART 1 Introduction to Managerial Finance both headquartered in New York City. There are also regional exchanges,...
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