If the Board of Directors Approves a Three for One

question 135

Multiple Choice

If the board of directors approves a three for one stock split, an investor who owns 300 shares before the split owns ____________ shares after the split.

• A)100
• B)200
• C)300
• D)900
• E)1,800

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Definitions:

Informationally Efficient

A market condition where all existing information is completely accounted for in stock prices, thereby eliminating the possibility of consistently securing above-average profits.

Random Walk

A statistical theory suggesting that stock market prices evolve according to a random path, making future movements unpredictable based on past trends.

Stock Market

An aggregate for buyers and sellers of stocks, which represent ownership claims on businesses; includes stock exchanges, over-the-counter markets, and electronic trading platforms.

Efficient Markets Hypothesis

The theory that stock prices fully reflect all available information, making it impossible to consistently achieve higher returns.