Brady inherited 500 shares of LNM, Inc. The stock is selling in the market for $92 per share and the company is contemplating a 5-for-3 stock split. Given this information, which of the following statements is correct?

Question

Quizplus · Accepted Answer

In a 5-for-3 stock split, for every 3 shares owned, a shareholder will receive 5 shares in return. Therefore, if Brady originally had 500 shares, after the split, he would have (500/3)*5 = 833.33 shares. The price per share would adjust accordingly so that the total market value of the holdings remains the same. Thus, if the stock was originally $92 per share, after the split, the new price would be $92*(3/5) = $55.20 per share.

Brady Inherited 500 Shares of LNM, Inc