A stock that pays a dividend of $0.50 closed at $40 on the cum-dividend date and opened the next day at $39.70. What is the implied personal tax rate of the marginal investor?

Question

Quizplus · Accepted Answer

The implied personal tax rate of the marginal investor is 40%. This is because the stock price dropped by $0.30 on the ex-dividend date, which is equal to the dividend of $0.50 multiplied by the tax rate of 40%.

A Stock That Pays a Dividend of $0