As the number of days until the next dividend decreases, what will happen to the present value of the stock?

Question

Quizplus · Accepted Answer

The present value of a stock is partially determined by its expected future cash flows, which include dividends. As the time until the next dividend payment decreases, the present value of that dividend increases because it is discounted over a shorter period. Therefore, the present value of the stock increases as it gets closer to the dividend payment date.

As the Number of Days Until the Next Dividend Decreases