Consider the Two Statements

question 227

Multiple Choice

Consider the two statements:
I. The closer "what you pay for" is to "what you want," then the more you can rely on strong incentives.
II. If you can't bridge the gap between "what you pay for" and "what you want" then strong incentive schemes can be better than weak incentive schemes.

• A) I is true; II is false
• B) I is false; II is true
• C) I and II are both true.
• D) I and II are both false.

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Definitions:

Yield

Yield is the income return on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost or current market value.

Dividend Growth Rate

The annual percentage rate at which a company's dividend payments to shareholders increase.

Required Return

The minimum rate of return an investor expects to achieve from an investment to compensate for its risk.

Dividend Yield

A benchmark in finance that compares the annual dividend output of a company with its stock price.