Question

The day before XYZ's stock went "ex-dividend" it was selling for $25 per share. If the quarterly cash dividend was $0.50,all other things being equal, the day after it went "ex-dividend" it should sell for:

Answer 1

The ex-dividend price is $24.50

Step-by-step explanation:

The ex-dividend price of the share is the price before dividend payment less the dividend paid.

The rationale for this approach of pricing is that new investors would be bought the shares after the dividends were paid are not entitled to that dividend payment.

Ex dividend price=price before dividend minus dividend

price before dividend is $25

dividend paid per share is $0.50

ex dividend price=$25-$0.50

=$24.50