Which Statement About Dividend Policies Is Correct

question 39

Multiple Choice

Which statement about dividend policies is correct?

• A)Modigliani and Miller argue that investors prefer dividends to capital gains because dividends are more certain than capital gains. They call this the bird-in-the hand effect.
• B)One advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.
• C)The key advantage of a residual dividend policy is that it enables a company to follow a stable dividend policy.
• D)The clientele effect suggests that companies should follow a stable dividend policy.

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Definitions:

Observations

Individual data points or measurements collected during a study or experiment.

Histogram

A graphical representation of the distribution of numerical data, showing the frequency of data points within successive intervals.

Proportion

The ratio of a part to the whole, often expressed as a fraction, decimal, or percentage.

Symmetric

Describes a shape or distribution that is mirrored evenly around its central point.