In the Theoretical World of Miller and Modigliani

question 91

Multiple Choice

In the theoretical world of Miller and Modigliani

• A)a firm should pay out 100 percent of earnings as dividends to maximize shareholder wealth
• B)the marginal tax rates facing investors are the most important single determinant of dividend policy
• C)dividends are important only for their informational content
• D)dividends reduce investors' uncertainty

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Definitions:

S&P 500 Index

A market index observing the activity of the top 500 large-scale corporations traded on US stock exchanges.

Futures Price

The agreed price for the assets to be traded in the future as determined in a futures contract.

Profit

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically represented by the yield of long-term government bonds.