32. A customer buys 1,000 shares of XYZ stock at $35.00 per share for $10. How many shares of XYZ will the customer own after the reverse stock split?
Answer: B
The customer will own 100 shares of XYZ after the reverse stock split.
After a reverse stock split, the total number of shares owned by a shareholder is reduced according to the reverse split ratio. In this case, if the customer originally bought 1,000 shares, the reverse split ratio results in them owning 100 shares.
A) 10 shares
This option is incorrect because a reverse stock split typically does not reduce the number of shares owned to such a low number unless the split ratio is significantly high, which is not indicated in the question context.
B) 100 shares
This option is correct as it reflects the number of shares the customer would own after the reverse stock split. Given a common reverse split ratio, such as 10-for-1, the customer would indeed own 100 shares after the adjustment.
C) 1,000 shares
This option is incorrect because a reverse stock split decreases the number of shares owned. The customer would not maintain the same amount of shares after the split; therefore, this option does not reflect the outcome of the reverse stock split.
D) 10,000 shares
This option is incorrect as it suggests an increase in the number of shares, which contradicts the nature of a reverse stock split. Instead of gaining shares, the customer would have fewer shares post-split.
Conclusion
The correct answer, 100 shares, accurately reflects the impact of a reverse stock split on the number of shares owned. All other options fail to represent the mechanics of a reverse stock split, either suggesting an incorrect reduction or an increase in shares. This emphasizes the importance of understanding stock splits and their effects on ownership.