Industries' stock currently sells for $120 a shareYou own 100 shares of the stockThe company is contemplating a 2-for-1 stock split Which of the following best describes what your position will be after such a split takes place?
A) You will have 200 shares of stock, and the stock will trade at or near $60 a share.
B) You will have 100 shares of stock, and the stock will trade at or near $60 a share.
C) You will have 50 shares of stock, and the stock will trade at or near $120 a share.
D) You will have 50 shares of stock, and the stock will trade at or near $60 a share.
E) You will have 200 shares of stock, and the stock will trade at or near $120 a share.

Question

Quizplus · Accepted Answer

A 2-for-1 stock split means that for every one share you currently own, you will receive two shares. Therefore, if you currently own 100 shares, after the split you will have 200 shares (100 x 2). However, the stock price will adjust to reflect the split, so instead of trading at $120 a share, the stock will trade at or near $60 a share ($120/2). Therefore, your position will be 200 shares of stock with a value of approximately $60 per share.

Industries' Stock Currently Sells for $120 a ShareYou Own 100