Modigliani and Miller, Recognizing That Dividends Do Somehow Affect Stock

question 86

Multiple Choice

Modigliani and Miller, recognizing that dividends do somehow affect stock prices, suggest that positive effects of dividend increases are attributable

• A) directly to the dividend policy.
• B) directly to the optimal capital structure.
• C) not to the informational content but to the consistency in the payment of dividends.
• D) not to the dividend itself but to the informational content of the dividends with respect to future earnings.

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Definitions:

Future Value

The value of an investment or a sum of money at a specified future date, accounting for specified interest rates or earnings over time.

Actively Managed

Refers to investment funds where portfolio managers make specific investments with the goal of outperforming an investment benchmark index.

Mutual Funds

Investment programs funded by shareholders that trade in diversified holdings and are managed by professional investment managers.

Index Funds

Index Funds are mutual funds or exchange-traded funds (ETFs) designed to follow certain preset rules so that the fund can track a specified basket of underlying investments.