When the board of directors approves a three for one stock split, the price for each share of stock
A)remains unchanged.
B)increases in value.
C)decreases in value.
D)is guaranteed to go up within a short period of time.
E)always drops to a third of its former value.

Question

Quizplus · Accepted Answer

When a stock split is approved, the number of outstanding shares increases while the overall value of the company remains the same. This means that the price per share will decrease, making it more affordable for investors to purchase. In a three for one stock split, for example, each shareholder would receive three shares for every one share they previously owned. Therefore, the price per share will decrease and the total value of the investor's holdings will remain the same.

When the Board of Directors Approves a Three for One