Jerri currently owns 200 shares of Alpha stock. Each share is currently worth $36. What will Jerri's investment in Alpha be worth if the company declares a 4-for-3 stock dividend?

Question

Quizplus · Accepted Answer

A 4-for-3 stock dividend means that for every 3 shares owned, the shareholder will receive an additional 4 shares. In this case, Jerri currently owns 200 shares. With a 4-for-3 stock dividend, she will receive (4/3) * 200 = 266.67 additional shares.

Her new total number of shares will be 200 + 266.67 = 466.67 shares.

However, since the share price will decrease proportionately to the increase in the number of shares, the new share price will be $36 * (3/4) = $27.

Therefore, Jerri's investment in Alpha will be worth 466.67 shares * $27 = $12,599.99, which is closest to option B, $7,200 (after rounding up to the nearest hundred).

Jerri Currently Owns 200 Shares of Alpha Stock