Which of the Following Is a Reason for a Company

question 186

Multiple Choice

Which of the following is a reason for a company to announce a stock split?

• A) to reward investors
• B) to increase total stockholders' equity
• C) to decrease the market price at which the stock is trading
• D) to provide the shareholders with something of value, when the company cannot afford a cash dividend

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Definitions:

Capital Market Line

A line used in the Capital Asset Pricing Model to illustrate the rates of return for efficient portfolios depending on the level of risk free rate and the level of market risk.

Market Portfolio

A theoretical portfolio that includes all assets in the market, with each asset weighted according to its market capitalization.

Risk Aversion

This concept describes an investor's preference to minimize uncertainty or to avoid risk in their investment decisions.

Risk-Free Rate

An anticipated gain from an investment devoid of financial risk, frequently illustrated through the returns on state bonds.