Module 2

Question 1

Factors Affecting Share Prices

Answer 1

• External economic and political factors
• Investor sentiment
• Profit expectations
• Dividend expectations
• Takeover activity
• The quality and track record of management

Question 2

London Stock Exchange

• The official list for main market
• AIM

Answer 2

The official list or main market
- Companies that are admitted or listed on the LSE make up the main market

AIM

• For companies that are too small for the OLOMM or too new to apply for a full stock market listing
• Objective is to provide wider accessibility for young and developing companies seeking to sell their shares
• Their shares are not described as listed

Question 3

Cost of Buying and selling equities

Answer 3

1. Commission
   - Charge from stockbrokers
   - Either flat fee or percentage based on the size of the deal
2. Stamp duty / Stamp duty reserve tax
   - Government taxes charged on transfer of UK registered shares
   - SD paid when bought using stock transfer
   - SDRT paid when bought electronically through CREST
   - Not applicable on companies listed on the AIM
   - SD is paid for shares of £1,000
   - SDRT does not have a threshold of £1000
   - Rate for both is 0.5% on purchase price
   - SD and SDRT Paid by the purchaser not the seller
   - SD rounded to the next multiple of £5
   - SDRT rounded to the nearest penny
3. The panel on takeover and mergers levy
   - Flat fee of £1 for all trades of £10,000 or more

Also Include spread

• Offer price which investors buy at
• Bid price which they sell at

Question 4

Preference Shares and Ordinary Shares

Answer 4

Preference shares

• pay a fixed half yearly dividend
• only paid if there are sufficient after-tax profits
• dividend payment has priority over ordinary shareholders
• generally no voting rights (but may have them in some cases)
• Yields are higher than bonds
• rank ahead of ordinary share capital but after loan capital and all other creditors
• Cumulative, non cumulative, participating, redeemable and convertible preference shares

Ordinary shares
- Last to be paid out in event of liquidation
- one share means one vote, more shares means more votes
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Question 5

SDLT and commercial bodies

Answer 5

Charged 15% on residential dwellings costing more than £500,000 bought by bodies such as companies or collective investment schemes