SIE Exam Question 235: Answer and Explanation

Question: 235

When the market price of a company's common stock has reached triple digits ($100 or above), the Board of Directors may elect to declare which of the below to make the shares more affordable?

• A. A stock dividend
• B. Reverse stock split
• C. A stock split
• D. Any of the above

Correct Answer: C

Explanation:

C: Splitting a stock provides each shareholder with more shares and the CMV (current market value) of the stock will decline proportionately. Because of the reduced price in the market, it becomes more 'affordable.'