Q$6)$ Consider the following tax rates:

The tax rates shown are for financial assets held for one year.

$($a$)$ Using the available tax information for $2001-2002,$ calculate the effective dividend tax rate for a $($i$)$ one$-$

year individual investor, $($ii$)$ corporations $($Note: Corporations need not pay taxes on $50\%$ of dividends

received from shares held in other corporations. In other words, only $50\%$ of the dividends received by a

corporate holder are taxable at the corporate tax rate$)($iii$)$ buy and hold individual investor, $($iv$)$ pension

fund. $(16$ pts$.)$

$($b$)$ By analyzing your calculations in section $($a$),$ is there a dividend clientele effect? $(5$ pts$.)$

$($c$)$ For the one$-$year individual investor $($section $($a$)($i$)$ above$),$ how much must the price of a stock change

the ex$-$dividend date to prevent a corporate holder from making arbitrage profits? $(10$ pts$.)$

$($d$)$ In general, what happened to the taxation policy in $2003$ and afterwards? What is the impact on the

dividend clientele effect? $(4$ pts$.)$