Suppose That the Pre-Tax Holding Period Returns on Two Stocks

question 5

Multiple Choice

Suppose that the pre-tax holding period returns on two stocks are the same. Stock A has a high dividend-payout policy and stock B has a low dividend-payout policy. If you are an individual in a high marginal tax bracket and do not intend to sell the stocks during the holding period,

• A) stock A will have a higher after-tax holding period return than stock B.
• B) the after-tax holding period returns on stocks A and B will be the same.
• C) stock B will have a higher after-tax holding period return than stock A.
• D) it is impossible to determine which stock will have a higher after-tax holding period return given the information available.

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Definitions:

Deviance

A rephrased definition for Deviant Behaviour, emphasizing actions or behaviors that depart from accepted norms in society, leading to various forms of reaction or sanction.

Social Institutions

Structures and mechanisms of social order and cooperation governing the behavior of individuals within a given human community.

Moral Regulation

The process by which norms, values, and moral beliefs are enforced by societal institutions to govern individual behavior.

Racial Profiling

The use of an individual's race or ethnicity by law enforcement as a key factor in deciding who to investigate, stop, search, or arrest.