SIE practice questionmediumEx-Dividend Date Price Adjustment
ABC Corporation declares a $1.00 per share dividend. The stock closes at $50 the day before the ex-dividend date. On the ex-date, the stock's opening reference price will be adjusted to approximately:
- A$50.00
- B$49.00✓ Correct answer
- C$51.00
- D$48.00
Explanation
Why B — $49.00
On the ex-dividend date, the stock's opening reference price is reduced by the amount of the dividend. Since the stock closed at $50 and the dividend is $1.00, the adjusted opening price is approximately $49.00. This adjustment reflects that new buyers on or after the ex-date will not receive the declared dividend, so the stock's value is reduced accordingly. Actual market trading may cause the price to differ from this reference.
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