When a Stock Dividend Is Small, for Example a 10

question 38

Multiple Choice

When a stock dividend is small, for example a 10% stock dividend,

• A) Retained earnings is not reduced because the dividend is immaterial.
• B) Retained earnings is reduced by the fair value of the stock.
• C) Retained earnings is reduced to the par value of the stock.
• D) Paid-in capital in excess of par value is unaffected.

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Definitions:

Duration

A measure of the sensitivity of the price of a bond or other fixed-income investment to changes in interest rates, typically expressed in years.

Basis Points

Basis Points are a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, with one basis point being 1/100th of 1%.

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, including all interest payments and repayment of principal.

Duration

An indicator reflecting how the price of bonds or similar debt securities reacts to fluctuations in interest rates, usually stated in terms of years.