B. If the dividend policy of a company is treated as an active policy strategy, this means that the company believes that the payment (or nonpayment) of dividends provides information about the company to the market. Therefore, the company will be very careful and specific with the amount that they pay as dividends each period.

C. This is a description of the residual dividend policy. See the correct answer for a complete explanation.

D. An active dividend policy assumes that shareholders want dividends to be paid and therefore profits of the company should not be withheld.

Question 48 C

A. By definition, if the spot rate is less than the forward rate, the currency is said to be selling at a premium. This does not necessarily indicate anything about the value of the currency.

B. By definition, if the spot rate is less than the forward rate, the currency is said to be selling at a premium.

C. By definition, if the spot rate is less than the forward rate, the currency is said to be selling at a premium.

D. By definition, if the spot rate is less than the forward rate, the currency is said to be selling at a premium. This does not necessarily indicate anything about the value of the currency.