SIE practice questionhardDividends
Which of the following occurs on the ex-dividend date for a common stock?
- AThe stock begins trading without the value of the next dividend✓ Correct answer
- BThe company pays the dividend to all shareholders
- CShareholders must sell shares before this date to receive the next dividend
- DOnly preferred shareholders receive the dividend
Explanation
Why A — The stock begins trading without the value of the next dividend
On the ex-dividend date, new buyers are not entitled to the declared dividend; the price usually drops by the dividend amount. Payment typically occurs later, and selling before the ex-date would mean not receiving the dividend.
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