On September 1,2018,Miami Corporation's common stock was selling at a market price of $300 per share.On that date,Miami announced a 2-for-1 stock split.At what price would you expect the stock to trade immediately after the split goes into effect?

Question

Quizplus · Accepted Answer

After the 2-for-1 stock split, each shareholder will receive 2 shares for every 1 share they previously held. Therefore, there will be twice as many shares outstanding and the price per share should decrease by half. Therefore, we can expect the stock to trade at $150 per share immediately after the split goes into effect.

On September 1,2018,Miami Corporation's Common Stock Was Selling at a Market