Canadian Securities Course (CSC) Level 1 Practice Exam

What is the difference between the cum-dividend period and the ex-dividend period?

1. Cum-dividend shares offer no entitlement compared to ex-dividend shares

2. Cum-dividend shares are bought before the dividend record date, ex-dividend shares are bought after

3. Ex-dividend period is when dividend is paid, cum-dividend is when it is not paid out

4. Ex-dividend period is between announcement and payment, cum-dividend is before the announcement

The correct answer is: Cum-dividend shares are bought before the dividend record date, ex-dividend shares are bought after

The correct answer is B. Cum-dividend shares are bought before the dividend record date, while ex-dividend shares are bought after the record date. The cum-dividend period is the time frame during which a buyer of a security is entitled to the upcoming dividend payment, whereas the ex-dividend period is after this entitlement has passed. This distinction is important for investors to keep track of in order to understand when they are eligible to receive dividends when trading in the stock market.