In 2014 Toni Purchased 100 Shares of Common Stock in Blue

question 142

Multiple Choice

In 2014 Toni purchased 100 shares of common stock in Blue Corporation for $5,280.In 2015,Blue declared a stock dividend of one share of its common stock for each 10 shares held.This year,2016,Blue's common stock split 2 for 1 at a time when the FMV was $80 a share.What is Toni's basis in each of her shares of the Blue Corporation stock if both of the earlier stock dividends were tax-free?

• A)$24 per share
• B)$48 for 110 shares and $0 for all additional shares
• C)$52.80 for 100 shares and $0 for all additional shares
• D)$80 per share

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Definitions:

Compounded Quarterly

Refers to the method of applying interest to an existing principal amount and any accrued interest every quarter or three months.

Effective Yield

A measure of the return on an investment, taking into account the effect of compounding interest.

Simple Annualized

A method of calculating the return on an investment by annualizing its simple interest without accounting for compounding.

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a specified period of time.