Assume that you own 146 shares of $16 par value common stock of a company and th
ID: 2471156 • Letter: A
Question
Assume that you own 146 shares of $16 par value common stock of a company and the company has a 2-for-1 stock sp4it when the market price per share is $48 How many shares of common stock will you own after the stock split? What will probably happen to the market price per share of the stock? The market price per share should remain same The market price per share should be half of what it was The market price per share should be double. What will probably happen to the par value per share of the stock? The par value per share will increase The par value per share will decrease The par value per share will remain same.Explanation / Answer
Answer A
Stock split ratio is 2 for 1 means that for every 1 share owned 2 newly par shares will be given.
So number of stocks after stock split = 146 shares * 2 = 292 shares
Answer B
As number of shares floated in the market will be doubled from its initial issue, the market price would be decreased upto half of its market price actually it was. So in present question, market price will be 24$.
Answer C
Stock split resulted decrease in its par value, may be half of its original par value as stock split ratio is 2 is for 1.