Common Stock
A company trading at $40 per share declares a 25% stock dividend. What is the adjusted stock price?
For stock dividends, the adjusted price = original price / (1 + dividend percentage). So $40 / 1.25 = $32. The shareholder has 25% more shares at 80% of the original price, maintaining the same total value.
Complete Analysis & Legal Rationale
For stock dividends, the adjusted price = original price / (1 + dividend percentage). So $40 / 1.25 = $32. The shareholder has 25% more shares at 80% of the original price, maintaining the same total value.
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.