Which of the Following Is True of a Change in Dividend

question 121

Multiple Choice

Which of the following is true of a change in dividend payments?

• A) There is no substitution effect because a change in dividend payments does not change the trade-off between work and leisure.
• B) There is no income effect because a change in dividend payments does not change the trade-off between work and leisure.
• C) There is no substitution effect because a change in dividend payments does not change a household's permanent income.
• D) There is no income effect because a change in dividend payments does not change a household's permanent income.

---

Definitions:

Treasury Bond

A long-term, fixed-interest U.S. government debt security with a maturity of more than ten years.

Yield

Yield is the income return on an investment, expressed as a percentage of the investment’s cost or current market value, commonly used for bonds and dividend-paying stocks.

Zero-Coupon Bonds

Bonds that don’t make periodic interest payments but are issued at a discount to their face value and redeemable for the face amount at maturity.

Expected Interest Rate

The anticipated rate at which interest is to be paid by a borrower for the use of money.