2. Dividend Payout Ratios in Russia tend to be higher than in the United States.
ID: 2825381 • Letter: 2
Question
2. Dividend Payout Ratios in Russia tend to be higher than in the United States. This implies which of the following?
Investors in Russia are more likely to believe in the Bird-In-the-Hand Theory since they do not trust Russian Accounting.
Investors in the US do not believe in any dividend theory.
Russian Investors are more like to follow the tax preference theory since Russia has lower taxes than the United States.
No dividend theory is implied from this information.
Investors in Russia are more likely to believe in the Bird-In-the-Hand Theory since they do not trust Russian Accounting.
Investors in the US do not believe in any dividend theory.
Russian Investors are more like to follow the tax preference theory since Russia has lower taxes than the United States.
No dividend theory is implied from this information.
Explanation / Answer
Answer is option (Investors in Russia are more likely to believe in the Bird-In-the-Hand Theory since they do not trust Russian Accounting.)
Explanation;
As we know that as per Bird-in-the-hand Theory, investors will be more interested in getting immediate dividend in compare to long-term capital gains from the investment made. In other words we can say that money in the hand today is more worthy than money to be received in future time.
So due to above mentioned reason, Dividend Payout Ratios in Russia tend to be higher than in the United States.
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