A stock split changes the number of shares and the corresponding per-share figures. The split itself does not create an instant increase in the shareholder’s total economic interest. For SIE stock split calculation questions, checking the total value is a useful way to catch an upside-down ratio.
Start with a two-for-one split
In this original exercise, an investor owns 120 shares priced at $80 each immediately before a two-for-one split. Assume no separate market movement.
The investor receives twice as many shares: 240. The mechanically adjusted price is half the old price: $40. Before the split, the holding is worth 120 multiplied by $80, or $9,600. Afterward, 240 multiplied by $40 gives the same $9,600.
An answer of 240 shares at $80 mistakenly doubles the holding’s value. An answer of 60 shares at $160 describes the direction of a reverse split, not this forward split.
Try a ratio that is less familiar
A three-for-two split means three shares after the split for every two held before it. An investor with 200 shares at $90 would have 300 shares at a mechanically adjusted $60, again assuming no other price change.
To calculate shares, multiply by 3/2. To calculate the adjusted price, multiply by the reciprocal, 2/3. Checking $18,000 on both sides confirms that the two calculations belong together. Use the SIE study materials for the surrounding investment concepts, while keeping a separate worked example for corporate-action arithmetic.
Reverse the direction
For a one-for-five reverse split, 500 shares at $2 become 100 shares at an adjusted $10. The number of shares falls while the per-share price rises. A higher quoted price alone does not show that the shareholder has made a profit.
FINRA’s stock split explanation describes both forward and reverse splits. Actual market prices can move independently of the mechanical adjustment, and fractional-share treatment depends on the particular corporate action. Do not invent a rounding rule when the question does not supply one.
A compact review method
Draw three columns labeled shares, price, and total. Complete the first two, then multiply them to check the third. When the totals differ in an exercise that excludes market movement, recheck which way you applied the ratio.
Use the SIE exam overview and topics to keep this drill in proportion to the full range of SIE topics. A few carefully checked examples are more useful than a page of ratios with no explanation of what changes and what stays constant.