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Series 7 practice questioneasyCorporate Actions — Stock Splits

A customer owns 200 shares of UVW stock at $80 per share. If UVW declares a 2-for-1 stock split, what will the customer's position be after the split?

  1. A100 shares at $160 per share
  2. B400 shares at $40 per share✓ Correct answer
  3. C200 shares at $80 per share
  4. D200 shares at $40 per share
Explanation

Why B — 400 shares at $40 per share

In a 2-for-1 stock split, shareholders receive two shares for every one share they own, and the price per share is halved. The customer's 200 shares become 400 shares, and the price adjusts from $80 to $40 per share. The total market value of the position remains the same ($16,000) before and after the split. Stock splits increase the number of outstanding shares while proportionally reducing the price per share, making the stock more accessible to smaller investors.

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