Suppose That the Pre-Tax Holding Period Returns on Two Stocks

question 48

Multiple Choice

Suppose that the pre-tax holding period returns on two stocks are the same.Stock A has a high dividend payout policy and stock B has a low dividend payout policy.If you are a high tax rate individual and do not intend to sell the stocks during the holding period,__________.

• A) stock A will have a higher after-tax holding period return than stock B
• B) the after-tax holding period returns on stocks A and B will be the same
• C) stock B will have a higher after-tax holding period return than stock A
• D) it is impossible to determine which stock will have a higher after-tax holding period return given the information available

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Definitions:

Unconscious Processes

Mental activities not readily available to conscious awareness, often influencing behaviors, thoughts, and feelings without one's notice.

Psychosexual Stages

According to Freud, stages in the developmental process children pass through; in each stage, sex drives are focused on the stimulation of certain areas of the body, and particular psychological issues can arouse anxiety.

Sequential Order

The arrangement of objects, actions, or events in a specific, logical sequence, one following another.

Superego

In psychoanalytic theory, the part of the psyche that operates as a moral conscience.