If Investors Do Not Like Dividends Because of the Additional

question 32

Multiple Choice

If investors do not like dividends because of the additional taxes that they have to pay, how would you expect stock prices to behave on the ex-dividend date?

• A)Fall by more than the amount of the dividend
• B)Fall exactly by the amount of the dividend
• C)Fall by less than the amount of the dividend
• D)The result cannot be predicted.

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Definitions:

Contract Price

The total financial compensation agreed upon by all parties involved in a contract for the sale, purchase, or delivery of goods or services.

Market Price

The present cost for purchasing or selling an asset or service in a specific market.

Consequential Damages

Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them.

Liability

A legal responsibility or obligation, particularly in the context of debts or torts.