What would the conversion price and conversion ratio be if Mikayla had a 4 for 1 stock split?
A) $5.33; 75
B) $8.33; 120
C) $22.00; 125
D) $27.50; 135

Question

Quizplus · Accepted Answer

In a 4 for 1 stock split, the number of shares increases by a factor of 4 and the price per share decreases by a factor of 4. Thus, the conversion ratio increases by a factor of 4 and the conversion price decreases by a factor of 4. 
If Mikayla's original conversion price and conversion ratio were $33 and 30, respectively, then after the stock split, the new conversion price would be $33/4 = $8.25 and the new conversion ratio would be 30 x 4 = 120. However, in the given answer choices, the closest option to these values is answer B, which has a conversion price of $8.33 and a conversion ratio of 120.

What Would the Conversion Price and Conversion Ratio Be If