A Firm's Stock Price May Decline by Less Than 50

question 148

True/False

A firm's stock price may decline by less than 50% after a 2 for 1 stock split if the reduction in price moves the stock into its optimal trading range.

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Definitions:

Utility

A measure of satisfaction or happiness that consumers derive from the consumption of goods and services.

Perfect Substitutes

Two goods that could be used in place of each other with no loss of utility to the consumer.

Perfect Complements

Goods that are always used together in fixed proportions, where the consumption of one good requires the consumption of a specific quantity of another good.

Indifference Curves

Graphs representing combinations of goods among which a consumer is indifferent, showing trade-offs in consumption preferences.