1. Even if both dividends and capital gains are taxed at the same ordinary income tax rate, the effect of each type of tax is different because

Multiple Choice

A. dividends are taxed when distributed, while capital gains are deferred until the stock is sold.

B. capital gains are actually taxed, while dividends are taxed on paper only.

C. capital gains are actually taxed, while dividends are taxed on paper; and both dividends and capital gains are taxed every year.

D. both dividends and capital gains are taxed every year.

2.

Figure 1 depicts the

Multiple Choice

A. position diagram for the buyer of a put option.

B. profit diagram for the buyer of a put option.

C. profit diagram for the buyer of a call option.

D. position diagram for the buyer of a call option.

Profit $80 $0 Share price Breakeven is $89 Loss Figure-1