Common Stock
An investor owns 500 shares of XYZ stock at $80 per share. After a 2-for-1 stock split, the investor will have:
Stock split: Shares multiply, price divides proportionally. Total value unchanged.
Complete Analysis & Legal Rationale
In a 2-for-1 split, shares double and price halves. 500 shares become 1,000 shares, and the price drops from $80 to $40. Total value remains $40,000.
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:
This describes a reverse split scenario.
The number of shares doubles in a 2-for-1 split.
Matches the verified teaching point in the explanation.
The price must adjust downward in a forward split.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.