Taggart Transcontinental has announced a $2 dividend.If Taggart's last price cum-dividend is $45,then,assuming perfect capital markets,what should its first ex-dividend price be?
A)$0
B)$2
C)$43
D)$45

Question

Quizplus · Accepted Answer

When a dividend is announced, the stock price is expected to drop by the amount of the dividend on the ex-dividend date. Therefore, the first ex-dividend price should be the last price cum-dividend minus the dividend, which is $45 - $2 = $43. It cannot be $0 or $2, and it is not $45 because the stock price is expected to drop by the dividend amount.

Taggart Transcontinental Has Announced a $2 Dividend