SIE (Securities Industry Essentials) Practice Exam

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If a customer holds 1,000 shares at $50.00 and receives a 20% stock dividend, what is the new number of shares and price per share?

1,000 shares at $60.00
1,100 shares at $45.45
1,200 shares at $41.67
1,250 shares at $40.00

The correct answer is: 1,200 shares at $41.67

After receiving a 20% stock dividend, the customer will now hold 1,200 shares (1,000 x 1.20 = 1,200) at a new price of $41.67 ($50.00 / 1.20 = $41.67). Option A is incorrect because it only accounts for the increase in shares and not the corresponding decrease in price. Option B and D are incorrect because they do not accurately calculate the increase in shares or the decrease in price.