Which of the Following Statements Is True Regarding Trading and Transactions

question 30

Multiple Choice

Which of the following statements is true regarding trading and transactions costs?

• A) As long as share issues are costless,investors are indifferent about whether to receive returns in the form of capital gains or as cash dividends on shares.
• B) If issuing securities entails large costs,both corporations and stockholders should prefer a full-retention strategy regarding dividends.
• C) If investors find creating homemade dividends too costly,they would not be willing to pay a premium for stocks that habitually pay dividends.
• D) All of the above statements are true.
• E) Only statements (a)and (b)are true.

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Definitions:

Straight-Line Method

An accounting method of depreciation in which an asset's cost is evenly spread over its useful life.

Actuaries

Professionals skilled in assessing the financial impact of risk and uncertainty, utilizing mathematics, statistics, and financial theory to study uncertain future events, especially in the insurance and finance industries.

Unrecognized Net Loss

Refers to losses that have occurred but have not been reported in the financial statements.

Projected Benefit Obligation

An actuarial estimate of the total retirement benefits, under a pension plan, that an employee has earned to date, based on expected future salary levels.