Series 7 Exam Question 12: Answer and Explanation

Question: 12

TUV listed stock closed at $20 on the business day prior to the ex-dividend date. If TUV previously announced a 55-cent dividend, at what price will the stock open the next day?

• A. 19.25
• B. 19.45
• C. 19.50
• D. 20.00

Correct Answer: B

Explanation:

B. Remember, the ex-dividend date is the first day that a stock trades without a previously declared dividend. So, the stock has to be reduced by the amount of the dividend on the ex-dividend date. Questions like this used to be a little more difficult when stocks traded in fractions instead of pennies. Now, it's simply a matter of subtracting the amount of the dividend from the closing price.

20 - 0.55 =19.45