Tom holds 1,000 shares in North stock now trading at $50. North has announced a

Question

Tom holds 1,000 shares in North stock now trading at $50. North has announced a dividend of $1 per share that will go ex-dividend when trading begins the very next day. Tom has no need for cash and would prefer to reverse the dividend. Which of the following actions would you suggest for Tom when North stock goes ex-dividend? Assume perfect markets. A. Buy 20.000 shares of North

B. Buy 20.408 shares of North

C. Buy 25.000 shares of North

D. Buy 2.000 shares of North

E. Sell 20.000 shares of North

Explanation / Answer

Total Dividend recieved = 1000*1 =$1000

Share price ex dividend = $50-$1 =$49

Number os hares that can be bought = 1000/49 = 20.408 share he should buy

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