When a stock splits, one share is split into two separate shares. A person initially owns 200 shares of stock. The stock splits five times.

Question

When a stock splits, one share is split into two separate shares. A person initially owns 200 shares of stock. The stock splits five times. If no shares were bought or sold during this time, how many shares of stock does that person own have all the splits?

3,200 shares 6,400 shares 12,800 shares 40,000 shares?

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Jasmine 8 months 2021-09-23T12:29:43+00:00 1 Answer 0 views 0

Answers ( )

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    2021-09-23T12:30:55+00:00

    All publicly-traded companies have a set number of shares that are outstanding. A stock split is a decision by a company’s board of directors to increase the number of shares that are outstanding by issuing more shares to current shareholders.

    For example, in a 2-for-1 stock split, an additional share is given for each share held by a shareholder. So, if a company had 10 million shares outstanding before the split, it will have 20 million shares outstanding after a 2-for-1 split.

    A stock’s price is also affected by a stock split. After a split, the stock price will be reduced (since the number of shares outstanding has increased). In the example of a 2-for-1 split, the share price will be halved. Thus, although the number of outstanding shares increases and the price of each share changes, the company’s market capitalization remains unchanged.

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