What Is the Major Argument That Supports the "Bird in the Hand

question 9

Multiple Choice

What is the major argument that supports the "bird in the hand theory"?

• A)There is no difference between dividend yields and capital gains.
• B)The risk profile of the firm depends on the risk of its cash flows, not its dividends.
• C)Present value of growth opportunities are more volatile, hence increase the risk of the firm.
• D)Dividend payments signal the good standing of the firm.

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Definitions:

Investment Banking

The sale of stocks and bonds for corporations.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for loans received from the central bank.