An investor owns 300 shares of stock currently selling for $70 per share.What should the investor expect to have after the stock declares a three-for-two split?

Question

Quizplus · Accepted Answer

A three-for-two stock split means that for every two shares owned, the investor will receive an additional share. Therefore, the initial 300 shares will become 450 shares (300 x 3/2 = 450). However, the price per share will decrease proportionally to reflect the increased number of shares, so the new price per share will be $70 x 2/3 = $46.67. Therefore, the investor should expect to have 450 shares selling for $46.67 each, which corresponds to a total wealth of 450 x $46.67 = $21,001.50.

An Investor Owns 300 Shares of Stock Currently Selling for $70