Danroy Inc has announced a $5 dividend. If Danroy's last price while trading cum-dividend is $65,what should its first ex-dividend price be (assuming perfect capital markets)?

Question

Quizplus · Accepted Answer

The ex-dividend price should be adjusted downward by the amount of the dividend to reflect the fact that buyers of the stock after the ex-dividend date will not receive the dividend.

Thus, the first ex-dividend price should be:

$65 - $5 = $60

Therefore, the best choice is C.

Danroy Inc Has Announced a $5 Dividend