Trading, Accounts & Prohibited ActsQuestion 181 of 398
A stock closed at $40 the day before its ex-dividend date, and the company declared a $1 cash dividend. All else equal, what is the expected opening price on the ex-dividend date?
a.$41
b.$40
c.$39
d.$38
Explanation
On the ex-dividend date, a buyer is not entitled to the upcoming dividend, so the market typically reduces the stock's opening price by the dividend amount. A $40 stock paying a $1 dividend is expected to open around $39, all else equal.
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