A Stock That Pays a Dividend of $1

question 31

Multiple Choice

A stock that pays a dividend of $1.10 closed at $72 on the cum-dividend date. If the personal tax rate of the marginal investor is 40%, what would you expect the stock to open at on the
Ex-dividend date, all else equal?

• A)$71.34
• B)$72.66
• C)$71.56
• D)$70.90

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Definitions:

Prepaid Insurance

An asset account that represents the amount paid for insurance contracts in advance for future coverage.

Insurance Expense

The cost associated with purchasing insurance coverage, recognized as an expense over the policy period.

Adjusting Entry

An accounting journal entry made at the end of an accounting period that ensures all financial statements are updated to reflect accurate and fair information.

Adjusting Entries

Adjusting entries are journal entries made at the end of an accounting period to update income and expense accounts and ensure that the financial statements reflect the accrual basis of accounting.