Suppose That the Pre-Tax Holding Period Returns on Two Stocks

Multiple Choice

Suppose that the pre-tax holding period returns on two stocks are the same.Stock A has a high dividend payout policy and stock B has a low dividend payout policy.If you are an individual in a high marginal tax bracket and do not intend to sell the stocks during the holding period,__________.

A) stock A will have a higher after-tax holding period return than stock B
B) the after-tax holding period returns on stocks A and B will be the same
C) stock B will have a higher after-tax holding period return than stock A
D) it is impossible to determine which stock will have a higher after-tax holding period return given the information available
E) none of the above