Consider the following equation: Pcum - Pex = Div × The term τg is:
A)the effective dividend tax rate.
B)the personal tax rate for capital gains.
C)the price per share before a dividend is paid.
D)the price per share after a dividend is paid.

Question

Consider the following equation: Pcum - Pex = Div ×  The term τg is:
A)the effective dividend tax rate. 
B)the personal tax rate for capital gains. 
C)the price per share before a dividend is paid. 
D)the price per share after a dividend is paid.

Quizplus · Accepted Answer

The term τg is the personal tax rate for capital gains, which is the tax rate applied to the gain made from selling a stock at a higher price than its purchase price. This term is used in the equation to calculate the after-tax price of a share of stock, taking into account any capital gains taxes that may apply.

Consider the Following Equation: Pcum - Pex = Div ×