Why might stockholders be upset to find out that their company's ...

[jon_i]

Why might stockholders be upset to find out that their company's profits that otherwise would have been distributed as dividends are instead invested in U.S. Treasury bonds?
 
  What will be an ideal response?

Question 2

Although the pegged exchange rate between the yuan and the dollar has undervalued the yuan, China had been reluctant to abandon the peg for fear that abandoning the peg would
 
  A) increase Chinese holdings of dollars.
  B) reduce exports and reduce economic growth.
  C) reduce capital inflows.
  D) increase exports and increase the current account deficit.

[trampas]

Answer to Question 1

They would be upset because those same investors could have taken those profits and done the same thing with them on their own or better. The only instance when it would be appropriate for the company to retain the earnings is when the rate of return on the profit is likely to be higher than what investors could reasonably be expected to earn on their own had the profits been distributed as dividends instead.

Answer to Question 2

B