Question

Difficulty: HardSettlement Dates, Trade Confirmations, and Corporate Actions

An investor holding $450$ shares of Apex Global common stock purchased at $\$80$ per share receives notification of a $5$ -for- $3$ stock split. Following the execution of the stock split, the investor sells $250$ shares at the new adjusted market price of $\$48$ per share. What is the total market value, in dollars, of the investor's remaining share position?

Answer: 24000 dollars

Answer

The total market value of the investor's remaining share position is $24,000.

In a 5-for-3 forward stock split, the investor receives 5 new shares for every 3 original shares held. The post-split share count is calculated as

450 \times \frac{5}{3} = 750

shares. When the investor sells 250 shares, the remaining position consists of

750 - 250 = 500

shares. Valued at the post-split price of

\$48

per share, the remaining market value is

500 \times \$48 = \$24,000

.

Step-by-Step Solution

1

Calculate post-split total share count

750 shares

A 5-for-3 stock split increases the share count by a factor of 5/3. Multiply the original 450 shares by 5/3 to find the new total share position.

2

Determine remaining share quantity

500 shares

Subtract the 250 shares sold by the investor from the post-split total of 750 shares.

3

Calculate final position market value

$24,000

Multiply the remaining 500 shares by the adjusted market price of $48 per share.

Key Concept

Corporate Action Adjustments (Stock Splits) and Post-Transaction Position Valuation

Estimated Time:1m 30s

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Topics

Settlement Dates, Trade Confirmations, and Corporate Actions