Strategy Beginner: Dividend Reinvestment Plans

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1.
When buying shares through a dividend reinvestment plan, you may actually receive newly issued shares.
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True. In some cases, the company issues brand-new shares.
2.
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.
3.
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.
4.
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.
5.
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.