SIE (Securities Industry Essentials) Practice Exam

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After a 1-3 reverse stock split, what is the total value of your position in ABC Company if you owned 300 shares before the split and the stock was worth $5?

$1,500
$100
$450
$900

The correct answer is: $1,500

After a 1-3 reverse stock split, the total value of your position in ABC Company would be $1,500. This is because a reverse stock split decreases the total number of shares while increasing the value of each individual share. In this scenario, the 300 shares you owned before the split would be reduced to 100 shares (1/3 of the original amount) but the value per share would increase to $15 (3 times the original value of $5). Therefore, your total value would be 100 shares x $15 per share = $1,500. The other options are incorrect because they do not take into account the effects of the reverse stock split. Option B is too low because it only considers the value of the original number of shares before the split. Options C and D are also incorrect because they do not take into account the decrease in the number of shares after the reverse stock split.