Which of the Following Statements Is Most Correct

question 2

Multiple Choice

Which of the following statements is most correct?

• A) If you were testing dividend theories and found that a dividend increase resulted in higher stock prices, then you could rule out all other theories and conclude that the bird-in-the-hand theory was most consistent with the evidence you found.
• B) The clientele effect suggests that investors choose their investments based on firms' past dividend policies and changes to established dividend policies may be costly to investors.
• C) Dividends paid under a residual dividend policy might send conflicting signals to investors.
• D) Both statements b and c are correct.
• E) All of the statements above are correct.

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Definitions:

Complementary Goods

Products or services that are used together, where the demand for one is increased when the price of the other decreases.

Demand Curve

An illustration that displays how the price of a product or service correlates with the amount people want to buy during a specific time frame.

Price

The amount in currency estimated, obligatory, or contributed as payment for something.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price within a specified time frame.