Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
Which of the following is not a benefit of a DRIP?
It pays double the regular dividend. DRIPs encourage long-term investing, and because the dividends are reinvesting regularly, investors may benefit from dollar-cost averaging. However, DRIPs respect the existing dividend rates.
2.
When are taxes on an investment's capital gains due?
In the year that the investment is sold. Although gains may occur, no tax is due until the investment is sold. This may or may not occur at one's retirement age.
3.
Ultimately, dividends are behind capital gains.
True. The underlying reason for investors bidding up the prices of stocks is that they are valuing the dividends that the company will pay, even if those dividends do not materialize for a while.
4.
When are taxes on an investment's dividends normally due?
In the year that the dividends occur. Dividends are immediately taxable. If they are earned in a tax-deferred account, then they will be due years in the future, but this is not the normal situation.
5.
What ultimately drives price appreciation of stocks?
Anticipated dividends. Ultimately, what causes stock prices to go up is the anticipation of dividend payouts, even if investors understand that there will not be dividends for many years.
