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:

Special Relationship

A legal doctrine indicating an obligation for one party to act with a higher degree of care toward another, often found in cases of dependence or trust.

Economic Duress

A situation where a person or organization is compelled to enter into a contractual agreement due to financial pressures, and their consent is induced by these circumstances rather than being genuinely voluntary.

Duress

Coercion or pressure applied to someone to compel them to act against their will or better judgment, often used in legal contexts to challenge the validity of agreements.

Unconscionability

A legal doctrine that describes terms that are so extremely unjust or overwhelmingly one-sided in favor of the party who has the superior bargaining power.