Finra Exam SIE Topic 4 Question 8 Discussion

Actual exam question for Finra's SIE exam

Question #: 8
Topic #: 4

[All SIE Questions]

A customer purchased 100 shares of Company XYZ common stock five years ago for $20.00 per share. Over the life of her investment, the customer received cash dividends of $2.00 per share, on which she paid total income taxes of $0.50 per share. She recently sold the stock for $30.00 per share. What is the customer's cost basis in each share of XYZ stock?

A$20.00

B$21.50

C$22.00

D$30.00

Show Suggested Answer

Suggested Answer: A

The cost basis of a stock represents the purchase price and does not include dividends received. Taxes paid on dividends also do not affect the cost basis.

Original purchase price per share = $20.00.

Dividends and taxes on dividends do not adjust the stock's cost basis.

A is correct because the cost basis remains $20.00.

B, C, and D incorrectly assume that dividends or taxes change the cost basis.

by Toi at Mar 21, 2025, 10:34 PM

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Vi

1 days ago

I agree with Lindsey, it should be $20.00 because that's what she originally paid per share.

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Boris

2 days ago

Hmm, I'm not sure about this one. The dividends and taxes are a bit confusing. I'll go with C) $22.00 just to be safe.

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Lindsey

6 days ago

I think the cost basis is $20.00.

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Juan

10 days ago

I think the answer is B) $21.50. The customer paid $20.00 per share, received $2.00 per share in dividends, and paid $0.50 per share in taxes, so the cost basis should be $20.00 - $0.50 + $2.00 = $21.50 per share.

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Bettina

1 days ago

I think the answer is B) $21.50.

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