Jim owns stock in gamma vision inc. That company announces that it will split its stock with three new shares per two old shares

Question

3 years ago

13

Jim owns stock in gamma vision inc. That company announces that it will split its stock with three new shares per two old shares

. Jim currently owns 400 shares valued at $25 each. How many shares will he have after the split and how much will each be worth?
a.) 600 shares worth $37.50 each
b.) 400 shares worth $16.67 each
c.) 600 shares worth $16.67 each
d.) 200 shares worth $37.50 each

Mathematics

1 answer:

g100num [7] · Answer 1 · 2022-01-04T20:16:38+03:00

Option C: 600 shares worth $16.67 each is the correct answer

Step-by-step explanation:

In the share market, a 2 to 3 split(mentioned in the question) means that the share holders get one half of already owned shares and the price of each share declines by one-third.

Given

Jim's shares = s = 400

Price per share =p = $25

First of all we will calculate the new shares:

Let sn be the number of new shares

As explained above

$sn = s + \frac{s}{2}\\sn = 400 + \frac{400}{2}\\sn = 400+200\\sn = 600$

Now the news price will be:

$New\ price = Old\ price - \frac{Old\ price}{3}\\= 25 - \frac{25}{3}\\= 25 - 8.33\\= 16.67$

The new number of shares will be 600 and the price of each share will be: $16.67

Hence,

Option C: 600 shares worth $16.67 each is the correct answer

Keywords: Shares, 2-to-3 split

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