If You Own 100 Shares in a Company That Announces

question 72

Multiple Choice

If you own 100 shares in a company that announces a 2-for-1 stock split (with no other announcement) ,you should

• A) be happy because your investment has doubled.
• B) be happy because you will be receiving cash from your investment as a result of the split.
• C) be sad because the value of your investment will decline because of the split.
• D) be indifferent because the overall value of your investment has not changed.

---

Definitions:

Wealth

The abundance of valuable resources or material possessions, or the control of such assets.

Flood

An overflow of water that submerges land that is usually dry, often caused by heavy rain, melting snow, or failure of a dam.

Expected Utility Maximizer

An economic principle that assumes individuals choose to maximize a utility function that represents their preferences under conditions of uncertainty.

Utility Function

An expression used in economics to model satisfaction or happiness derived from consuming goods and services, measuring consumer preferences.