You currently own 100 shares of stock in Beverly Brothers Inc. The stock currently trades at $120 a share. The company is contemplating a 2-for-1 stock split. Which of the following best describes your position after the proposed stock split takes place?
A) You will have 200 shares of stock, and the stock will trade at or near $120 a share.
B) You will have 200 shares of stock, and the stock will trade at or near $60 a share.
C) You will have 100 shares of stock, and the stock will trade at or near $60 a share.
D) You will have 50 shares of stock, and the stock will trade at or near $120 a share.
E) You will have 50 shares of stock, and the stock will trade at or near $60 a share.

Question

Quizplus · Accepted Answer

A 2-for-1 stock split means that for every share you own, you will receive an additional share. Therefore, if you currently own 100 shares, after the split you will have 200 shares. However, the stock price will likely decrease proportionally to the split, so the new trading price for each share will be around $60 ($120/2).

You Currently Own 100 Shares of Stock in Beverly Brothers