FINRA General Securities Representative SIE Question # 13 Topic 2 Discussion
SIE Exam Topic 2 Question 13 Discussion:
Question #: 13
Topic #: 2
An investor buys 100 shares of a stock at $50.00 per share. The company declares a 10% stock dividend. What will the investor's cost basis per share be following the payment of the dividend?
A stock dividend increases the number of shares owned without affecting the total cost basis. The new cost basis per share is calculated by dividing the original total investment by the new number of shares:
Original total investment = 100 shares × $50.00 = $5,000
After a 10% stock dividend, the investor owns 110 shares.
New cost basis = $5,000 ÷ 110 shares =$45.45per share.
B is correctbecause it reflects the adjusted cost basis per share.
[Reference:IRS Publication 550: Investment Income and Expenses, ]
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