SIE (Securities Industry Essentials) Practice Exam

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To allow shareholders to maintain their proportionate ownership in the company, a corporation issues:

Common stock
Bonds
Preferred stock
Preemptive rights

The correct answer is: Preemptive rights

Preemptive rights are the most appropriate answer because they allow shareholders to maintain their proportionate ownership in the company. Bonds offer shareholders no voting rights and thus do not grant any ownership in the company. Common stock does grant voting rights, but does not guarantee that shareholders maintain their proportionate ownership as dilution can occur with new stock issuances. Preferred stock does not grant voting rights and therefore does not allow for maintenance of proportionate ownership.