Consider the Following Five Statements

question 16

Multiple Choice

Consider the following five statements:
i.The expected return of a portfolio of shares is the weighted average of the expected returns for each share.
ii.All other things being equal,a cum-dividend share price should fall by the amount of a dividend that is paid.
iii.One of the effects of dividend imputation is the removal of 'double taxation' of company profits that are distributed as dividends.
iv.For a shareholder with a marginal tax rate that is lower than the company tax rate,no tax will be payable on the fully franked dividend received,and the excess credit can be applied against other assessable income.
v.In a one-for-nine bonus issue,if the cum-bonus price was $10,then the theoretical ex-bonus price would be $9.
How many of the above statements are true and how many are false?

• A) 3 statements are true and 2 are false
• B) 2 statements are true and 3 are false
• C) 4 statements are true and 1 is false
• D) 1 statement is true and 4 are false

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Definitions:

Rate Of Return

The appreciation or depreciation of an investment's value within a selected period, stated as a percentage of the investment's outset value.

Lottery Winnings

Money or prizes won through a system of random drawing or chance.

Annual Payments

The amounts that need to be paid once every year as part of a financial obligation.

EAR

Effective Annual Rate, a representation of an interest rate that takes into account the compounding of interest, shown as an annual rate.