The Purpose of a Stock Dividend Is To

question 114

Multiple Choice

The purpose of a stock dividend is to:

• A)avoid the taxes associated with a stock repurchase plan.
• B)keep the price in a trading range so it's accessible to small investors.
• C)immediately increase shareholder wealth.
• D)send a positive signal when the firm can't afford to give stockholders cash.

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Definitions:

Put Option

A put option is a financial contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Call Option

An agreement in finance which allows the purchaser to have the option, but not the commitment, to purchase a certain amount of a specific asset at a pre-agreed price during a fixed period.

Specified Price

A predetermined price set in a contract or agreement, often related to sales or financial instruments.

Perfect-Hedging

A risk management strategy that completely eliminates the risk associated with an investment by taking an equal but opposite position in the derivatives market.