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

question 9

Multiple Choice

Suppose that the pre-tax holding period returns on two shares are the same. Share A has a high dividend payout policy and share B has a low dividend payout policy. If you are a high tax rate individual and do not intend to sell the shares during the holding period, ________.

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

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