On September 1,2015,Maryland Corporation's common stock was selling at a market price of $200 per share.On that date,Maryland announced a 3 for 2 stock split.At what price would you expect the stock to trade immediately after the split goes into effect?

Question

Quizplus · Accepted Answer

A 3 for 2 stock split means that for every 2 shares an investor currently holds, they will receive an additional share, resulting in a total of 3 shares. Since Maryland Corporation's stock was selling at $200 per share before the split, the total value of 2 shares would have been $400. After the split, the investor would have 3 shares with a total value of $400. Thus, the expected price of the stock after the split would be $400/3 = $133.33 per share (choice C).

On September 1,2015,Maryland Corporation's Common Stock Was Selling at a Market