Q99
The rational expectations model of dividend policy says that ______________.
A.
Since the expectations of the investors are always rational, there will be no effect of dividend policy on the valuation of the firm
B.
If the investors have rational expectations, they will value a dividend paying firm higher than a non-dividend paying firm
C.
If the declared dividend is in line with expectations of the investors, there will be no effect on the valuation of the firm
D.
If the declared dividend is in accordance with the expectations, the change in the firms value will be minimal
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
The rational expectations model of dividend policy says that If the declared dividend is in accordance with the expectations, the change in the firms value will be minimal.