An Increase in Share Price Following an Increase in Dividends

question 23

Multiple Choice

An increase in share price following an increase in dividends is logical if the:

• A) firm borrows to obtain cash for the dividend.
• B) increased dividend signals higher future earnings.
• C) dividend is believed to be temporary.
• D) clientele effect is not important.

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the values deviate from the mean.

Standard Error

The standard deviation of the sampling distribution of a statistic, typically the mean, indicating the variability of an estimate.

Mean

The mean is the average of a set of numbers, calculated by adding them all together and then dividing by the count of those numbers.

Z-statistic

A statistical metric that measures the number of standard deviations a data point is from the mean, used in hypothesis testing.