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Series 7 practice questionmediumCorporate Actions — Stock Dividends

A customer owns 300 shares of QRS stock at $60 per share. The company declares a 10% stock dividend. What is the customer's adjusted position?

  1. A330 shares at approximately $54.55 per share✓ Correct answer
  2. B300 shares at $66 per share
  3. C310 shares at $60 per share
  4. D330 shares at $60 per share
Explanation

Why A — 330 shares at approximately $54.55 per share

A 10% stock dividend gives shareholders an additional 10% of their current holdings. The customer receives 30 additional shares (300 x 10% = 30), bringing the total to 330 shares. The price adjusts downward to maintain the same total market value: $18,000 / 330 shares = approximately $54.55 per share. Unlike cash dividends, stock dividends do not distribute cash but rather increase the number of shares outstanding while proportionally reducing the share price. The total value of the position remains approximately the same.

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