Stock Splits

question 314

Multiple Choice

Stock splits:

• A) Are designed to increase the wealth of the shareholders.
• B) Occur more frequently now than in the past due to the increasing importance of mutual funds.
• C) Significantly increase the liquidity of the shares.
• D) Can either increase, decrease, or not affect the market value of a firm.
• E) Increase the book value of the shareholder's equity.

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Definitions:

Compounded Monthly

In finance, it refers to the process of computing interest on an investment or loan on a monthly basis, with each month's interest being added to the principal for the calculation of subsequent interest.

Interest

The cost of borrowing money or the payment received for saving or investing money, typically expressed as an annual percentage of the principal.

Nominal Rate

The interest rate stated on a financial product, not adjusted for inflation.

Effective Rate

The actual interest rate an investor earns or pays on an investment or loan, taking into account the effects of compounding.