Question

It is August 14th and John has just purchased 100 shares of Cash Cow Inc. for​ $1,200 with a settlement date of August 16th. Cash Cow recently declared a dividend of​ $1.00 per share payable to shareholders of record as of August 15th. How much money did John pay for the right to the recently declared​ dividend? A. John paid​ $0.00 for the dividend because he was not the shareholder of record on August 15th. ​Therefore, the dividend payment went to the previous owner of the stock. B. John paid​ $100.00 for the dividend because he purchased the stock prior to the dividend record date. C. John paid​ $50.00 for the dividend because the record date was between purchase date of August 14th and the settlement date of August 16th. ​Therefore, the dividend payment is shared equally between the previous owner of the stock and John. D. This is a complicated issue and not easily answered.​ Thus, there is not enough information to answer this question.

Answer 1

Answer:

A. John paid $0.00 for the dividend because he was not the shareholder of record on August 15th. Therefore, the dividend payment went to the previous owner of the stock.

Explanation:

Settlement date is the date on which ownership of share transfer to buyer of stock, it is normally two days after trade date.

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.