Question

All else equal, the market value of a stock will tend to DECREASE by roughly the amount of the dividend on the:

A) holder-of-record date

B) dividend declaration date.

C) payment date

D) ex-dividend date.

Answer 1

Answer:

The correct answer is D

Explanation:

When the company or the firm declares the dividend, it sets a record date when the shareholder must be on the books of the company as a shareholder in order to receive or collect the dividend.

So, the ex- dividend date is the one which is normally 2 days business days and should be before the record date. Therefore, the stock market value will tend to reduce through roughly the dividend amount on the date of ex- dividend.