Canadian Securities Course (CSC) Practice Exam

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Prepare for the Canadian Securities Course Exam with our comprehensive quiz. With flashcards and multiple-choice questions, each equipped with hints and detailed explanations, you'll build the knowledge you need to succeed in your exam.

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What is a Dividend Reinvestment Plan (DRIP) intended for?

To encourage selling dividends for profit
To prevent dividends from being paid out
To automatically reinvest stock dividends in the same company's stock
To distribute dividends among shareholders

The correct answer is: To automatically reinvest stock dividends in the same company's stock

A dividend reinvestment plan (DRIP) is intended to automatically reinvest stock dividends back into the same company's stock. This is beneficial because it allows shareholders to increase their ownership in the company without having to spend additional money on purchasing more shares. Options A and B are incorrect because they do not reflect the purpose of a DRIP. Selling dividends for profit or preventing dividends from being paid out goes against the concept of reinvesting dividends. Option D is incorrect because a DRIP does not distribute dividends among shareholders, but rather reinvests them into the company.