1. Wedgie Corp. has just announced a $0.50 cash dividend.

If the record
date is Wednesday, March 10, when is the last day an investor can
purchase the stock and receive the dividend?
(A) March 4
(B) March 5
(C) March 7
(D) March 8
The answer youre looking for is Choice (B). In order for an investor to
purchase the stock and receive a previously declared dividend, he
must purchase the stock at least one business day before the ex-
dividend date. This question is a little more difficult because you have
a weekend to take into consideration.

The ex-dividend date is March 8, which is two business days prior to

the record date. This investor has to buy the stock before the ex-
dividend date in order to receive the dividend, so he has to buy it
March 5 or before (because the 6th and 7th are Saturday and
Sunday). The last day an investor can purchase the stock and receive
the dividend is March 5.

ABC Company declares a $1 dividend, payable to shareholders of record on January 11. The ex-
dividend date is January 9. Several scenarios are:

1. Mr. Smith buys 10 shares of ABC Company on January 8, and sells it on January 9. Mr. Smith
is entitled to the $1 dividend on each of his shares, since he was the last owner of record prior
to the ex-dividend date.
2. Mr. Jones has held 500 shares of ABC Company stock for the last three years, and retains his
ownership through the ex-dividend date. Mr. Jones is entitled to the $1 dividend on each of his
500 shares.
3. Mr. Carlson buys 250 shares of ABC Company on January 10. This is after the ex-dividend
date, so he is not entitled to the declared dividend.