A client, Mr. Henderson, holds 500 shares of Alpha Corp. common stock. Alpha Corp. announces a 2-for-1 stock split. What will be the immediate impact on Mr. Henderson's investment?

Question: A client, Mr. Henderson, holds 500 shares of Alpha Corp. common stock. Alpha Corp. announces a 2-for-1 stock split. What will be the immediate impact on Mr. Henderson's investment?

Answer options:

• He will have 1,000 shares, and the total market value of his investment will double.
• He will have 250 shares, and the par value per share will double. ✅ He will have 1,000 shares, and the share price will approximately halve, leaving the total market value unchanged.
• He will have 500 shares, and each share will represent a larger percentage ownership of the company.

Correct answer: He will have 1,000 shares, and the share price will approximately halve, leaving the total market value unchanged.

Explanation: A 2-for-1 stock split means the number of shares doubles, and the share price approximately halves, keeping the total market value of the investor's holding constant. The par value per share would also typically halve.