SIE Exam Question 553: Answer and Explanation

Question: 553

Which of the following is/are correct regarding dividends paid by growth stocks and value stocks?

(1) Because they are growing and expanding, growth stocks typically do not pay large dividends.

(2) Most of the earnings generated from value stocks are reinvested back into the company.

• A. (1) only
• B. (2) only
• C. Both (1) and (2) are correct.
• D. Neither (1) or (2) are correct.

Correct Answer: A

Explanation:

Because they are growing and expanding, growth stocks typically do not pay large dividends. Most of the earnings generated from growth stocks are reinvested back into the company.