Two Weeks Ago, Jensen's Declared a Dividend of $1

question 80

Multiple Choice

Two weeks ago, Jensen's declared a dividend of $1.34 a share.The ex-dividend date is tomorrow.All else constant, which one of the following is the best estimate of Jensen's opening stock price tomorrow?

• A)$1.34 lower than today's closing price
• B)Today's closing price minus an amount approximately equal to the aftertax value of the dividend
• C)The same as today's closing price since the dividend is expected
• D)$1.34 higher than today's closing price
• E)Today's closing price plus an amount approximately equal to the aftertax value of the dividend

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Definitions:

Installment Payments

Payments made regularly over a period of time to settle a debt or purchase price.

Redemption

Redemption is the process of repurchasing or retiring a financial instrument, such as bonds or preferred stock, by the issuer before its maturity date.

Premium on Bonds Payable

The amount by which a bond's selling price exceeds its face value, reflecting higher interest earnings for the investor than the market rate.

Conversion

The process of changing assets from one form to another, such as the conversion of raw materials into finished goods.