Urvashi owns 10 shares of Kloud Komputing stock, with a market value o

QUESTION

Urvashi owns 10 shares of Kloud Komputing stock, with a market value of $500 per share. The company issues a 2-for-1 stock split. After the split, what is the total value of Urvashi’s stake in Kloud Komputing?

A) $10,000
B) $2,500
C) $5,000
D) $1,000
E) $20,000

ANSWER

Answer: C
Explanation: C) In a 2-for-1 stock split, the value of the Kloud shares is cut in half to $250, and the number of shares Urvashi holds is doubled to 20. Urvashi now has twice as many shares, but the total value remains the same when the stock is split. The value of Urvashi’s holdings will increase or decrease as the share price of $250 fluctuates with the market.