SIE (Securities Industry Essentials) Practice Exam

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After a 1-for-2 reverse stock split, what will be an investor's stock position if initially owning 100 shares at $50 each?

  1. 100 shares at $25 per share

  2. 50 shares at $100 per share

  3. 200 shares at $25 per share

  4. 50 shares at $50 per share

The correct answer is: 50 shares at $100 per share

After a 1-for-2 reverse stock split, the total number of shares will decrease by half and the stock price will double. This means that the investor's 100 shares will become 50 shares, but since the stock price is doubled, the value of each share will also double to $100. This results in the investor having a stock position of 50 shares at $100 per share. Options A and D are incorrect because they do not take into account the reverse stock split, which changes the number of shares and the stock price. Option C is incorrect because it assumes that the investor will own more shares after the split, when in fact the total number of shares decreases. Therefore, the correct answer is B.

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