Which of the Following Statements Is False

question 80

Multiple Choice

Which of the following statements is false?

• A) In perfect capital markets, holding fixed the investment policy of a firm, the firm's choice of dividend policy is irrelevant and does not affect the initial share price.
• B) In a perfect capital market, when a dividend is paid, the share price drops by the amount of the dividend when the stock begins to trade ex-dividend.
• C) In perfect capital markets, an open market share repurchase has no effect on the stock price, and the stock price is the same as the ex-dividend price if a dividend were paid instead.
• D) In perfect capital markets, investors are indifferent between the firm distributing funds via dividends or share repurchases. By reinvesting dividends or selling shares, they can replicate either payout method on their own.

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Definitions:

Prior Restraint

A government action that prohibits speech or other expression before the speech happens, based on the anticipation of harm.

Right Of Privacy

The concept that one's personal information is protected from public scrutiny and the government cannot invade it without a compelling need.

Supreme Court

The highest judicial court in a country or state, which has the ultimate authority to adjudicate in disputes, interpret the constitution, and laws.

Constitution

The fundamental principles and established precedents according to which a state or other organization is governed.