When a Firm Announces a Two-For-One Stock Split (In the Absence

question 104

Multiple Choice

When a firm announces a two-for-one stock split (in the absence of other new information) , investors should expect that:

• A)earnings per share will fall by half but stock price will remain the same.
• B)stock price will fall by half but earnings per share will remain the same.
• C)both earnings per share and stock price will remain the same.
• D)both earnings per share and stock price will fall by half.

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Definitions:

False Cause Fallacy

A logical fallacy where a cause-and-effect relationship is incorrectly assumed between two events simply because they occur together.

Explaining Events

The process of providing detailed reasoning or evidence to clarify how or why something occurred.

Predicting Events

The activity of forecasting future events or trends based on current data or patterns.

Probabilistic Generalization

A type of reasoning that involves drawing conclusions about populations based on samples, accepting a degree of uncertainty.