Trading & MarketsQuestion 94 of 125
When a company pays a cash dividend, on the ex-dividend date the opening stock price is typically:
a.Increased by the amount of the dividend
b.Reduced by the amount of the dividend
c.Unchanged
d.Doubled
Explanation
On the ex-dividend date the stock's opening price is generally reduced by the dividend amount because new buyers will not receive that dividend. This adjustment keeps the market value consistent for buyers before and after the dividend right is removed.
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