SIE practice questionmediumStock Splits
How does a reverse stock split affect a shareholder’s total investment value?
- AThe number of shares decreases, but total value remains the same.✓ Correct answer
- BThe total investment value decreases.
- CThe number of shares and value both increase.
- DOnly the share price decreases.
Explanation
Why A — The number of shares decreases, but total value remains the same.
Reverse splits reduce shares and raise price so total value is unchanged. The other answers do not reflect a reverse split’s math.
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