Which of the Following Statements Is FALSE

question 65

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.

---

Definitions:

Bailee

A person or entity in temporary possession of property belonging to another, with the responsibility of care and return.

Bailor

The owner of a chattel who delivers possession of the chattel to another in a bailment.

Vicarious Performance

A performance of a contract by a third party, where the contracting party remains liable for the performance.

Licensed Mechanic

A technician who has obtained official authorization or certification to perform mechanical repairs and maintenance on various types of machinery, especially vehicles.