A two-for-one stock split will result in: A) the firm acquiring new assets. B) a

Question

A two-for-one stock split will result in:

A) the firm acquiring new assets.
B) a decrease in the stock price, but an increase in shareholder wealth.
C) an increase in the stock price, and an increase in shareholder wealth.
D) a decrease in the stock price and no change to shareholder wealth.

Based on the following information, make an estimate of the stock's beta:

Month 1 = Stock +1.0%, Market +1.1%

Month 2 = Stock +1.2%, Market +1.4%

Month 3 = Stock -1.5%, Market -2.0%.

Choose option below:

a) Beta is greater than 1.0.
b) Beta is less than 1.0.
c) Beta equals 1.0.
d) There is no consistent pattern of returns.

Explanation / Answer

The correct option is D) A decrease in the stock price, and no change to shareholder wealth

The correct option is b) Beta is less than 1.0

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