Consider the following equation: P_cum - P_ex= Div × The term τ_g is: A) the personal tax rate for dividend. 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

Quizplus · Accepted Answer

τ_g represents the personal tax rate for capital gains, which is applied to the difference between the selling price (P_{ex) and the buying price (}) of a share. The equation calculates the total tax liability on a cumulative dividend paid on a share, after accounting for the tax on capital gains.

Consider the Following Equation: Pcum - Pex = Div ×

Consider the Following Equation: P_cum - P_ex= Div ×