Strategy Beginner: Dividend Reinvestment Plans

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1.
A benefit of dividend reinvestment plans to corporations is that they are an inexpensive way to borrow money.
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False. They are an inexpensive way to raise capital without borrowing money.
2.
With a dividend reinvestment plan, the shares you purchase can be new, or they can be already-existing shares. If they are already existing, how do they get to you?
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A trustee outside the company buys them on the market. After doing this, the trustee hands them to the company, which issues them to you.
3.
In most cases, before you can participate in a dividend reinvestment plan, you must purchase your original shares _________.
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From a broker. Most, but not all, companies require this.
4.
Through a dividend reinvestment plan, you can purchase shares of stock for a reduced brokerage fee.
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True. You can purchase them free of brokerage commissions.
5.
Benefits of dividend reinvestment plans to investors include all of the following except _______.
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None of the above. Investors may receive discounts on brokerage fees, company products, and the option to purchase additional shares.