SIE practice questioneasyCommon Stock — Stock Splits
An investor owns 200 shares of XYZ stock at $80 per share. After a 2-for-1 stock split, the investor will have:
- A400 shares at $40 per share✓ Correct answer
- B100 shares at $160 per share
- C400 shares at $80 per share
- D200 shares at $80 per share
Explanation
Why A — 400 shares at $40 per share
In a 2-for-1 stock split, the number of shares doubles and the price is halved. 200 shares become 400 shares, and the price adjusts from $80 to $40. The total market value remains the same: 200 x $80 = $16,000 = 400 x $40. Stock splits do not change the overall value of the investment.
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