Common Stock
A company announces a 1-for-5 reverse stock split. An investor who owns 500 shares at $4 per share will have:
In a 1-for-5 reverse split, shares are divided by 5 (500 / 5 = 100 shares) and the price is multiplied by 5 ($4 x 5 = $20). The total value stays the same at $2,000.
Complete Analysis & Legal Rationale
In a 1-for-5 reverse split, shares are divided by 5 (500 / 5 = 100 shares) and the price is multiplied by 5 ($4 x 5 = $20). The total value stays the same at $2,000.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.