Preference share
A share carrying a preferential right to payment of dividend at a fixed amount or fixed rate, and to repayment in a winding up.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Asset allocationThe decision on how to distribute a client's wealth across asset classes — the first decision in building a portfolio, and the one that explains most of what the portfolio then does.
- Bonus strippingBuying units shortly before a bonus issue and selling the originals at the halved NAV to manufacture a capital loss — a loss the Income Tax Act disallows inside a defined 3-month and 9-month window.
- CorrelationA measure of the strength and direction of the relationship between two variables, running from -1 to +1, and the single factor that determines how much risk diversification actually removes.
- Coupon rateThe rate of interest a bond pays, applied to its face value and never to its market price — which is why the coupon tells you the cash flow but not the return.
- Credit spreadThe extra yield a non-government borrower must pay over a government security of the same tenor — the market price of credit risk, quoted as an add-on over the risk-free rate.
- Current yieldA bond's annual coupon in rupees divided by its current market price — the cash income the bond throws off this year, ignoring any gain or loss at redemption.
Where this is taught
- Series X-B · Chapter 11: Taxation of Equity Productsintroduced here
- Series X-A · Chapter 7: Introduction to Investmentsintroduced here
- Series XII · Chapter 2: Securities: Types, Features and Concepts of Asset Allocation and Investingintroduced here
- Series II-A · Chapter 1: Introduction to Securitiesintroduced here
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