Question

21. T. Bone. Pickens is a keen share trader. He's planning to buy shares in NAB Ltd on November 1 and sell them on November 2. You notice that November 1 is the company's ex-dividend date. What should you advise T. Bone to do?

Select one:

a. He should do nothing. Share prices are unpredictable and the price might go up or down.

b. He should take into account the Beta for the company's shares.

c. He should buy twice as much as he originally planned because he will be entitled to the dividend.

d. He should revise his plans because on the ex-dividend date, the company's share price will fall by at least as much as the dividend.

e. He should consider a diversification strategy.

Answer 1

The answer is

d. He should revise his plans because on the ex-dividend date, the company's share price will fall by at least as much as the dividend.

Ex-Dividend date is the date on which company's shares start trading without dividend.

and hence, the price of share falls by the amount of dividend or higher

He will not be entitled to dividend as the holder of shares on record date only are eligible for dividend.

Beta of shares will not change due to dividend