NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
A stock trades cum-dividend at Rs 480 and the company declares a dividend of Rs 12 per share. Ignoring other factors, what is the theoretical ex-dividend opening price?
The theoretical ex-dividend price is Rs 468. On the ex-date, new buyers are not entitled to the dividend, so the price is expected to fall by the Rs 12 dividend from Rs 480, while shareholders of record receive the payout separately.
- ARs 492
- BRs 468Correct
- CRs 480
- DRs 440
Explanation
On the ex-date the price is expected to drop by the dividend amount, since buyers no longer receive it. 480 - 12 = Rs 468. Rs 492 adds the dividend, a sign error. Rs 480 ignores the adjustment.
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