If a Firm Declares a 20:1 Stock Split,and the Pre-Split

question 54

True/False

If a firm declares a 20:1 stock split,and the pre-split price was $500,then we might expect the post-split price to be $25.However,it often turns out that the post-split price will be higher than $25.This higher price could be due to signaling effects investors believe that management split the stock because they think the firm is going to do better in the future.The higher price could also be because investors like lower-priced shares.

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Definitions:

Circadian Rhythm

A biological activity that is repeated about every 24 hours.

Photoperiodic Response

The biological reaction of organisms to the length of day or night, affecting behaviors such as flowering in plants and mating in animals.

Vernalization

Stimulation of flowering in spring by long exposure to low temperature in winter.

Statoliths

Small granules, often made of calcium carbonate, found within certain cells associated with the detection of gravitational orientation in plants and some invertebrate animals.