1. Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. The theory of ________ explains this phenomenom.

a. Information content

b. clientele effect

2. Which of the following is a characteristic of a firm's optimal divident policy?

It maximizes the firm's total assets.

It maximizes the firm's return on equity.

It maximizes the firm's earnings per share.

It maximizes the firm's stock price.

3. In some cases, analysts notice that groups of similar investors tend to flock to stock that have divident policies consistent with their needs. This circumstance is an illustration of:

a. The clientele effect

b. The information content effect