Which of the Following Statements Is FALSE

question 22

Multiple Choice

Which of the following statements is FALSE?

• A) In a perfect capital market, when a dividend is paid, the share price drops by the amount of the dividend when the share begins to trade ex-dividend.
• B) In perfect capital markets, investors are indifferent between the firm distributing funds via dividends or share repurchases. By reinvesting dividends or selling shares, they can replicate either payout method on their own.
• C) In perfect capital markets, holding fixed the investment policy of a firm, the firm's choice of dividend policy is irrelevant and does not affect the initial share price.
• D) In perfect capital markets, an open market share repurchase has no effect on the share price, and the share price is the same as the ex-dividend price if a dividend were paid instead.

---

Definitions:

Sampling Procedure

The method or process used to select a sample from a population for statistical analysis.

Confidence Interval

A grouping of values from sample statistics, thought to potentially envelop the value of an unknown population feature.

Population Proportion

The ratio of members in a subgroup of a population to the total population, expressed as a fraction or percentage.

Confidence Coefficient

The probability level, expressed as a percentage, that the confidence interval actually includes the true parameter value.