Question

In: Economics

1) Corporations are required to pay dividends. a) True b) False 2) A bond is an...

1) Corporations are required to pay dividends.

a) True

b) False

2) A bond is an asset of the holder.

a) True

b) False

3) A bond represents part ownership in a company.

a) True

b) False

4) The government considers realized capital gains to be income.

a) True

b) False

Solutions

Expert Solution

1. Corporations are required to pay dividends- The answer is False

More generally, ividends are issued in cash from retained earnings on a quarterly basis, but they may also come in stock form. Companies are not required to pay any dividends at all, but they may choose to provide investors with portions of their earnings as an incentive to continue investing in their companies. Paying dividends also offers a long-term commitment between an investor and businesses–a bond that can explain why investors are less likely to sell their stocks when prices decline.

2. A bond is an asset of the holder- The answer is True

The bond is a debt instrument under which the issuer owes a debt to the holders and is obliged (depending on the terms of the bond) to pay them interest (the coupon) or repay the principal at a later date, called the maturity date. In most cases, interest is due at fixed intervals. The bond is very often negotiable, that is, it is possible to transfer possession of the debt in the secondary market. It ensures that it is highly liquid on the secondary market once the exchange agents at the bank medallion stamp the debt.

3. A bond represents part ownership in a company- The answer is False

A Stock represents part ownership in a company

4. The government considers realized capital gains to be income- The answer is True

Until investing in a fund with a significant unrealized capital gain element, tax-conscious mutual fund investors should calculate the unrealized cumulative capital gains of a mutual fund expressed as a percentage of its net assets. This is referred to as the disclosure to capital gains from a portfolio. Capital gains are a taxable duty to investors of the fund when paid by a fund. For shares held for one year or less, short-term capital gains occur. Such earnings are taxed as ordinary income on the basis of the tax filing status of the taxpayer and adjusted gross income. In general, long-term capital gains are taxed at a lower rate than regular income.

Rahul Sunny answered 6 months ago
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