CFP Certified Financial Planner Test Prep

Category - Foundation

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Suppose you have common stock of TigerCorp amounting to $100 million. At the end of the year, TigerCorp declares a dividend paid to common stock holders. The effect of the dividend on your investment would be:

Increasing its value
Decreasing its value
Having no impact

Explanation

Answer: B - Your investment would decrease in value.

A dividend is the partial liquidation of the company with respect to a stock holder, not an option holder.

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