What would you expect to happen to the price of a share of stock on the day it goes ex-dividend if you ignore taxes? The price should:
A) increase by the amount of the dividend.
B) decrease by the amount of the dividend.
C) decrease by one-half the amount of the dividend.
D) remain constant.

Question

Quizplus · Accepted Answer

When a company goes ex-dividend, it means that anyone who buys the stock on or after the ex-dividend date will not receive the dividend. Therefore, there is less incentive to buy the stock, and demand decreases, causing the price to decrease by approximately the same amount as the dividend. This is known as the ex-dividend drop, which is why the price should decrease by the amount of the dividend.

What Would You Expect to Happen to the Price of a Share