15-2 Effects of Dividends on Stock Prices Gen Corp. is expected to pay a dividend of $3.50 per year indefinitely. If the appropriate rate of return on this stock is 11 percent per year, and the stock consistently goes ex-dividend 35 days before dividend payment date, what will be the expected minimum and maximum prices surrounding the dividend payment? First, determine the daily interest rate: IDaily- Then the maximum stock price, will occur right before the stock goes ex-dividend: Po-Dividend / ( 1 + 1 Daily)(# days from ex-dividend thru payment)] + [(Dividend / i) X (1 / (1 + Daily)# days from ex-dividend thru payment)] And the minimum stock price, will occur right after the stock goes ex-dividend: P,-( Dividend / i) X ( 1 / (1 + Daily)(# days from ex-dividend to payment)