A stock goes ex-dividend: A. two business days prior to the record date. B. two business days after the declaration date. C. three business days prior to the record date. D. three business days prior to the payment date.

The correct answer is C. three business days prior to the record date. When a company declares a dividend, they set a record date. Any shareholder who owns the stock on or before the record date is entitled to receive the dividend. However, it takes a few days for the record date to be established and for the stock transfer books to be updated. This time period is known as the ex-dividend date. On the ex-dividend date, the stock begins trading without the dividend. This means that anyone who buys the stock on or after the ex-dividend date will not receive the dividend, even if they hold the stock through the record date. The ex-dividend date is typically set three business days prior to the record date. This gives enough time for the stock transfer books to be updated and for the market to adjust to the fact that the stock is trading ex-dividend.