Assume the current share price of Company A is $4.50 and on the following day these shares will begin trading ex-dividend.If the dividend is 20 cents per share,what is the expected ex-dividend share price?
A)$4.50
B)$4.70
C)$4.30
D)$3.60

Question

Quizplus · Accepted Answer

When a stock goes ex-dividend, its price typically drops by the amount of the dividend. Therefore, the expected ex-dividend share price of Company A would be $4.30 ($4.50 - $0.20 = $4.30). Therefore, the best choice is option C. Option A is incorrect because the share price would be expected to decrease due to the dividend. Option B is too high, as it does not take into account the expected decrease in share price due to the dividend. Option D is also too low and does not reflect the decrease in share price due to the dividend.

Assume the Current Share Price of Company a Is $4