Holding other factors constant, an increase in the capital gains tax rate will:

Question

Quizplus · Accepted Answer

An increase in the capital gains tax rate will have less effect on the valuation of dividend-paying stocks than on stocks with high growth prospects. This is because dividend-paying stocks generate income through dividends and are less affected by changes in capital gains tax rates. On the other hand, high growth stocks are typically valued on their future earnings potential, and an increase in capital gains tax rates can make them less attractive to investors.

Holding Other Factors Constant, an Increase in the Capital Gains