Which of the Following Statements Is CORRECT

question 15

Multiple Choice

Which of the following statements is CORRECT?

• A)Under the tax laws as they existed in 2014, a dollar received by an individual taxpayer as interest income is taxed at the same rate as a dollar received as dividends.
• B)One nice feature of dividend reinvestment plans (DRIPs) is that they reduce the taxes investors would have to pay if they received cash dividends.
• C)Empirical research indicates that, in general, companies send a negative signal to the marketplace when they announce an increase in the dividend. As a result, share prices fall when dividend increases are announced because investors interpret the increase as a signal that the firm expects fewer good investment opportunities in the future.
• D)If a company needs to raise new equity capital, a new-stock dividend reinvestment plan would make sense. However, if the firm does not need new equity, then an open market purchase dividend reinvestment plan would probably make more sense.
• E)Dividend reinvestment plans have not caught on in most industries, and today over 99% of all DRIPs are offered by utilities.

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Definitions:

Testing Effects

The impact that pre-testing may have on the subjects' performance in subsequent assessments.

Cross-sectional

A research design that collects data from a population, or a representative subset, at one specific point in time.

Reasoning Ability

The capacity to think logically, understand and apply principles, and solve problems, often measured through cognitive tests.

Age

A measure of the length of time that a person or thing has existed, often used as a variable in research to examine differences or changes over time.