Lex,a Salesperson for Macro Corporation,learns That Macro Will In?crease the Dividend

question 29

Multiple Choice

Lex,a salesperson for Macro Corporation,learns that Macro will in?crease the dividend it pays to shareholders.Lex buys 1,000 shares of Macro stock.When the price increases,Lex sells his shares for a profit.Lex would not be liable for insider trading if the information about the dividend was

• A)material when he sold the stock.
• B)public after he bought the stock.
• C)public before he bought the stock.
• D)too speculative when he bought the stock.

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Definitions:

Optimal Capital Budget

The set of projects that maximizes the value of the firm.

Retained Earnings

The portion of a company’s net profits which is kept within the company instead of being paid out to the shareholders as dividends.

Dividend Reinvestment Plans

Programs that allow investors to automatically reinvest their cash dividends into additional shares or fractional shares of the underlying stock.

Open Market

A freely competitive market where buyers and sellers can engage in transactions with minimal government intervention.