Mount Reindeer Pure Spring Water Inc. is considered a liquid company because of its generous dividend policy. Prior to the firm's ex-dividend date of May 15th, the stock is selling for a price of $23.18 per share
If you purchase the stock prior to May 15th, you will receive a dividend of $1.15. If you waited until May 16th to buy the stock, and there was no other event to change the price of the stock, what would be the stock's expected price?
A) $18.58
B) $22.03
C) $23.18
D) Unknown
Answer: B
Explanation: B) Original cash price - dividend = the ex-dividend price. $23.18 - $1.15 = $22.03.
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