Fernley Company has declared a 3 for 1 stock split. At the close of trading just prior to going ex-dividend, Fernley was at $60 per share. At the open of trading on the ex-date, the price will be closest to

A. $20
B. $40
C. $60

Correct Answer: A

At the start of trading on the ex-distribution date, there will be three times as many shares outstanding as at the close the previous day. Assuming no significant change in the total share value, the share price should be $60/3 = $20.