Consider the following equation: P_retain = P_cum × The term τ_i in this equation represents A) the corporation's tax rate on interest income. B) the investor's tax rate on capital gains. C) the investor's tax rate on interest income. D) the investor's tax rate on cumulative dividends.

Question

Quizplus · Accepted Answer

The term τ_i in the equation refers to the investor's tax rate on interest income. This is because it is multiplied by the term representing the retained portion of the dividends paid out by the corporation to the investor, indicating that it relates to the tax implications of interest income received.

Consider the Following Equation: Pretain = Pcum × the Term

Consider the Following Equation: P_retain = P_cum × the Term