Question

Axis Inc. declared a dividend on July 27, 2004 to be payable on September 10, 2004. The list of shareholders who would be entitled to this dividend would be prepared on August 10, 2004

a) a) Identify the key dates involved with dividend payment

b) If Tim bought some shares on August 7, 2004, would he have received the dividend declared for this period? If not, who would receive it?

c) You buy a share of stock before the ex‐dividend date for US$15. The dividend declared is US$1.50 per share. Ignoring the effect of taxes, does the value of your investment increase after the ex‐dividend date? Does it decrease? Why? Why not?

Answer 1

a)

	Key dates
Date of declaration	July 27,2004
Record date	August 10,2004
Date of payment	September 10, 2004

b)

Tim would be entitled to receive dividend as his name would appear in shareholders register on record date that is shares are purchased before the record date (August 10,2004)

c)No,The value of investment will neither increase nor decrease ,since as dividend is declared ,the price goes cum -dividend and as soon as it is paid it becomes ex dividend   .so price will remain the same.