Wyatt Oil Pays a Regular Dividend of $2

question 96

Multiple Choice

Wyatt Oil pays a regular dividend of $2.50 per share.Typically,the stock price drops by $2.00 per share when the stock goes ex-dividend.Suppose the capital gains tax rate is 20%,but investors pay different tax rates on dividends.Absent transactions cost,the highest dividend tax rate of an investor who could gain from trading to capture the dividend is closest to:

• A)0%.
• B)20%.
• C)24%.
• D)36%.

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Definitions:

Public Choice Analysis

An economic framework that applies theories and methods traditionally used to analyze market behavior to political decision-making.

Budget Deficits

A situation where a government's expenditures exceed its revenue over a specified period, leading to borrowing or the depletion of reserves.

Budget Surpluses

The situation in which a government's revenues exceed its expenditures during a specific period of time, allowing for savings or debt reduction.

Public Choice Analysis

The study of political behavior using methods and principles of economics, focusing on the self-interest motives of participants and the impact of their behavior on public policy.