Becker Financial recently completed a 7-for-2 stock split.Prior to the split, its stock sold for $90 per share.If the total market value was unchanged by the split, what was the price of the stock following the split?

Question

Quizplus · Accepted Answer

A 7-for-2 stock split means that for every 2 shares owned, the shareholder will receive an additional 7 shares. Therefore, the total number of shares will increase by a factor of 7/2 = 3.5. 
To keep the total market value unchanged, the price per share must then decrease by the same factor of 3.5. 
So the price per share after the split will be $90 / 3.5 = $25.71. 
Therefore, the correct answer is C.

Becker Financial Recently Completed a 7-For-2 Stock Split