What Are Automatic Dividend Reinvestment Plans Designed to Do

question 15

Multiple Choice

What are automatic dividend reinvestment plans designed to do?

• A)aid shareholders in creating their preferred dividend policy
• B)raise new equity capital for the firm through market repurchases
• C)eliminate excess illiquid shares from the open market
• D)help investors avoid paying taxes on dividends

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Definitions:

Sunk Cost Fallacy

The sunk cost fallacy is an economic concept that refers to the misconception leading people to continue investing in something solely because they have already invested resources in it, not considering the future benefits independently of past costs.

Argumentum Ad Baculum

A logical fallacy or argument that uses the threat of force or intimidation to persuade or ensure compliance, essentially an appeal to force.

Argumentum Ad Hominem

A logical fallacy where an argument is rebutted by attacking the character, motive, or other attributes of the person making the argument, rather than addressing the substance of the argument itself.

Reductio Ad Absurdum

A method of argumentation that seeks to disprove a statement by showing it leads to an absurd or contradictory conclusion.