Capital Gains May Be Preferred by Investors Over Dividends Even

question 8

Multiple Choice

Capital gains may be preferred by investors over dividends even if their tax rates are equal because:

• A)Taxes on dividends are withheld from paycheques
• B)Taxes on capital gains are paid annually
• C)Taxes on capital gains can be timed
• D)After-tax dividends are less certain than capital gains

---

Definitions:

Intentional Behavior

Actions that are performed with awareness and purpose towards achieving a specific goal.

Illusory Correlation

The tendency to overestimate the link between variables that are related only slightly or not at all.

Hot Hand Player

The belief or phenomenon where a person is perceived to be more likely to succeed in a task (e.g., scoring in sports) because of previous consecutive successes, despite statistical evidence often suggesting randomness.

Coin Flip

A method of making a binary decision or selecting randomly between two options using the outcome of a tossed coin.