Series 7 Exam Question 286: Answer and Explanation

Question: 286

Mark Schwimmerr owns 2,500 shares of TP Corporation. Which of the following actions would dilute Mark's equity?

I. Primary share offerings (registered)

II. A stock split

III. Payment of a stock offering

IV. Secondary share offerings (registered)

• A. I only
• B. II only
• C. I, II, and IV
• D. I, II, III, and IV

Correct Answer: A

Explanation:

A. Another primary issue of shares would dilute Mark's ownership because new shares would be coming to the market. Don't forget that when a corporation issues stock dividends, splits its stock, or makes a secondary offering, the percent of equity does not change.