Question

You own 280 shares of stock in Green Mild Chili Peppers, Incorporated, that currently sell for $51.95 per share. The company has announced a dividend of $2.89 per share with an ex-dividend date of May 3. Assuming no taxes, what is the value of your portfolio on May 3?

Multiple Choice
O $809.20
O $14,221.00
O $13,736.80
O $14,011.80
O $14,546.00

Answer 1

The value of the student's portfolio on May 3rd, the ex-dividend date, would be the market value of their stock holdings plus the dividends to be received, resulting in a total of $14,546.00.

Step-by-step explanation:

To calculate the value of your portfolio on the ex-dividend date, which is May 3rd, you need to consider both the market value of the shares as well as the dividend you are to receive. The current price of the stock is $51.95 per share, and you own 280 shares, meaning the market value of your shares is 280 shares × $51.95 per share. The value of the dividend to be received is $2.89 per share, so the total dividend amount is 280 shares × $2.89 per share.

Now, let's compute these values:

1. Market value of shares = 280 shares × $51.95 per share = $14,546.
2. Total dividend = 280 shares × $2.89 per share = $809.20.

On the ex-dividend date, the market value of shares usually drops by the amount of the dividend, so the expected value of the portfolio would be market value minus the dividend amount. However, this question asks for the value of the portfolio on May 3rd, which would include the value of the dividend. Therefore, the value of your portfolio on May 3rd, including both the market value of your shares and your dividends, is equal to the initial market value of $14,546.00.

So, the correct answer is: $14,546.00

Answer 2

The value of the portfolio of Green Mild Chili Peppers, Inc., on May 3, considering dividends and assuming no change in stock price due to ex-dividend date would be the total value of shares plus dividends, which is not accurately reflected in the presented options. However, if only considering the stock value, it is $14,546.00.

Step-by-step explanation:

The question involves calculating the value of a stock portfolio on a specific date, considering dividends that are to be paid. You own 280 shares of Green Mild Chili Peppers, Inc., and each share is currently priced at $51.95. On May 3, the ex-dividend date, each share you own will pay a dividend of $2.89. However, since the value of the dividend is likely to be reflected in the stock price (the stock price typically drops by the dividend amount on the ex-dividend date), the value of the stock itself does not change due to the dividend. Therefore, the portfolio value will be the number of shares multiplied by the share price, plus the total dividends received.

The calculation for the portfolio value on May 3 is: (280 shares × $51.95 per share) for the stock value, plus (280 shares × $2.89 per share) for the dividend value, resulting in a portfolio value of $14,546 for the stock and $809.20 for the dividends. The total portfolio value on May 3, assuming no stock price change due to external factors, would be 280 × $51.95 (stock value) + 280 × $2.89 (dividend value) which equals $14,546.00 + $809.20 = $14,355.20. However, this final total portfolio value is not listed among the options provided. It is likely that the question presupposes that the stock value remains the same without the dividend adjustment, in which case we would select the first term only, being the stock value of $14,546.00, for the final answer.

Please note that in realistic scenarios, the price per share may decrease by the amount of the dividend on the ex-dividend date. However, if we ignore this aspect as the question suggests, we would consider only the stock value for our answer.