The Amount of Dividend That Can Be Paid to Shareholders

question 41

Multiple Choice

The amount of dividend that can be paid to shareholders:

• A)depends on how profitable a business is and on the current assets of the business.
• B)is limited to the amount of current period profits.
• C)is limited to the amount of current period profits and accumulated profits.
• D)is limited to the amount of current period profits,accumulated profits and paid up capital.

---

Definitions:

Promised Yield

The return that a bond issuer agrees to pay to the bondholder until maturity, expressed as an annual percentage.

Coupon Rate

The annual interest rate paid by a bond issuer to the bondholder, usually expressed as a percentage of the bond's face value.

Duration

A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates, often expressed in years.

Perpetuities

A type of annuity that receives an infinite series of identical cash flows with no end.