Which of the Following Is True Concerning the Distinction Between

question 21

Multiple Choice

Which of the following is true concerning the distinction between interest rates and returns?

• A) The rate of return on a bond will not necessarily equal the interest rate on that bond.
• B) The return can be expressed as the difference between the current yield and the rate of capital gains.
• C) The rate of return will be greater than the interest rate when the price of the bond falls between time t and time t + 1.
• D) The return can be expressed as the sum of the discount yield and the rate of capital gains.

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Definitions:

Dividend Policy

A company's approach to distributing profits to its shareholders, determining how much to pay out in dividends and how often.

Investor Confidence

The degree of faith that investors have in the stability and profitability of the financial markets, influencing their willingness to invest.

Clientele Effect

A theory suggesting that the stock price movements are influenced by the preferences of a company's current shareholder base.

Payout Ratios

The proportion of earnings paid out to shareholders in dividends, indicating how much profit is distributed versus retained.