Question

An investor owns 100 shares of XYZ common stock at the current market price of $50 per share. If XYZ conducts a 1-for-2 reverse stock split, the investor's post-split stock position will be:

Answer 1

After a 1-for-2 reverse stock split, an investor owning 100 shares at $50 each will have 50 shares valued at $100 per share, keeping the total investment value the same at $5,000.

Step-by-step explanation:

In the context of buying and selling stocks, a 1-for-2 reverse stock split means that for every two shares an investor owns, they will be consolidated into one share. So, if an investor owns 100 shares of XYZ common stock and XYZ conducts a 1-for-2 reverse stock split, the investor will then own 50 shares.

However, even though the number of shares decreases, the total value of the investment remains the same because the market price per share after the split will double to $100, maintaining the initial market value of $5,000 (100 shares x $50 per share). Therefore, the investor's post-split stock position will be 50 shares valued at $100 per share.