When a Company Declares a 2-For-1 Stock Split

question 192

Multiple Choice

When a company declares a 2-for-1 stock split,

• A)stockholders' equity is doubled.
• B)there is no effect on total stockholders' equity.
• C)a shareholder who previously held 100 shares will have 300 shares after the split.
• D)the price of each share will be one-third of what it was before the stock split.

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Definitions:

Supply

The total amount of a product or service available for purchase at any given price level.

Inflation Rate

The percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Nominal Rate

The interest rate unadjusted for inflation; the face value rate expressed as a percentage.

Real Rate

The interest rate that has been adjusted to remove the effects of inflation, showing the true cost of borrowing.