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Dividends

1) On May 18th, you purchased 1,000 shares of BuyLo stock. On June 5th, you sold 200 shares of this stock for $21 a share. You sold an additional 400 shares on July 8th at a price of $22.50 a share. The company declared a $.50 per share dividend on June 25th to holders of record as of Thursday, July 10th. This dividend is payable on July 31st.
How much dividend income will you receive on July 31st as a result of your ownership of BuyLo stock?

2) Priscilla owns 500 shares of Delta stock. It is January 1, 2006, the company recently issued a statement that it will pay a $1.00 per share dividend on December 31, 2006 and a $.50 per share dividend on December 31, 2007. Priscilla does not want any dividend this year but does want as much dividend income as possible next year. Her required return on this stock is 12%. Ignoring taxes, what will Priscilla's homemade dividend per share be in 2007?

Solution Preview

1. Initial number of shares = 1,000
Shares sold = 200 on June 5th + 400 on July 8th
The shares sold on July 8th would continue to be in your name since the sale should take place 3 business ...

Solution Summary

The solution explains two questions relating to dividend income and homemade dividends

$2.19