Which of the Following Statements Is FALSE

question 30

Multiple Choice

Which of the following statements is FALSE?

• A)Individuals in the highest tax brackets have a preference for stocks that pay high dividends,whereas tax-free investors and corporations have a preference for stocks with no or low dividends.
• B)To compare investor preferences,we must quantify the combined effects of dividend and capital gains taxes to determine an effective dividend tax rate for an investor.
• C)The dividend-capture theory states that absent transaction costs,investors can trade shares at the time of the dividend so that non-taxed investors receive the dividend.
• D)Differences in tax preferences create clientele effects,in which the dividend policy of a firm is optimized for the tax preference of its investor clientele.

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Definitions:

Federal Reserve System

The central banking system of the United States, responsible for monetary policy, bank regulation, and the stability of the financial system.

GDP

Gross Domestic Product, the total market value of all goods and services produced within a country in a specific time period, used as a broad measure of overall economic performance.

Personal Disposable Income

The amount of money that individuals have available for spending and saving after income taxes have been accounted for.

Manufacturing Output

The total value or volume of goods and products produced within a manufacturing sector in a specific period.