Immediately after the stock split, an investor who owned 100 share before the split will own
A) 100 shares worth a total of $4200.
B) 200 shares worth a total of $8400.
C) 200 shares worth a total of $16,800.
D) 200 shares with a par value of $8.00 each.

Question

Quizplus · Accepted Answer

A stock split does not change the total value of the investor's holdings, only the number of shares and the share price. In a 2-for-1 stock split, the investor's 100 shares would become 200 shares (100 x 2) and the share price would be halved, resulting in each share being worth $42 ($84 / 2). Therefore, the total value of the investor's holdings after the split would be 200 x $42 = $8400.

Immediately After the Stock Split, an Investor Who Owned 100