If Investors Are Expecting a Dividend Cut,then the Announcement of the Decreased

question 12

Multiple Choice

If investors are expecting a dividend cut,then the announcement of the decreased dividend payment will:

• A) cause the stock price to decline by more than the dividend amount.
• B) not affect the stock price as long as the announcement was in line with expectations.
• C) cause the stock price to increase if the cut was greater than anticipated.
• D) signal that the next dividend will be cut even further.

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Definitions:

Long-Term Memory

The aspect of memory capable of storing information for prolonged periods, ranging from a few minutes to a lifetime.

Retroactive Inhibition

The phenomenon where newer memories interfere with the recall of older memories.

Interference

A cognitive theory that proposes that people forget information because other information learned either before or after interferes with its retrieval.

Retroactive Interference

The phenomenon where newly acquired information interferes with the recall of previously learned information.