SIE Exam Question 213: Answer and Explanation

Question: 213

Which of the following are true of the term equity?

I. It is interchangeable with the term stock.

II. It provides the investor with ownership stake in the issuing corporation.

III. The shares do not mature and are therefore perpetual.

IV. A corporation's goal in selling shares is to create capital.

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

Correct Answer: C

Explanation:

Equity is interchangeable with the term stock, provides ownership for the investor, has no maturity, and is sold in order to provide capital to the issuing corporation.