Respuesta :
Answer:
1.98359
Explanation:
Given that :
Index have three stocks and the prices of those sticks are $93, $351, and $74, respectively. Usually what stock split does is to increase he number of share outstanding without any interference with the original total amount of money.
So if Baker ( the company B ) undergoes 2:1 split stock, it typically implies that one share will be divided by two shares.
New divisor for price - weighted index is given by the formula:
Price weighted index = [tex]\frac{Price_{A} + Price _{B afterstockspit} +Price_{C}}{\frac{Price_{A} + Price _{B beforestockspit} +Price_{C}} {Number of Stocks } }[/tex]
Price of stock B before stock split is = $351
To determine the new stock B after stock split; we have
Price weighted index₀ = [tex]\frac{Price _{B before stock split}}{Stocl split ratio}[/tex]
= [tex]\frac{351}{2}[/tex]
= $175.5
The new divisor for the price weighted index is as follows;
Price weighted index = [tex]\frac{Price_{A} + Price _{B afterstockspit} +Price_{C}}{\frac{Price_{A} + Price _{B beforestockspit} +Price_{C}} {Number of Stocks } }[/tex]
Price weighted index = [tex]\frac{93+175.5+74}{ \frac{93+351+74}{3} }[/tex]
Price weighted index = 1.98359
Thus, the new divisor for the price weighted index = 1.98359
Answer:The New Divisor for the price weighted index = 4.29 (rounded off to two decimals)
Explanation:
Able stock = $93
Baker = $351
Charlie = $74
Price Weighted Index Formula = sum of company share prices/number of companies
Price Weighted Index Formula = ($93 + $351 + $74)/5
Price Weighted Index = $425/5 = $85
The Price Weighted index before share split = $85 and the divisor is 5
Calculating the New Divisor for the Price weighted index
Let The new divisor for the price weighted index be α
Price of Barker stock after sare split = $351 x 1/2 = $175.5
Price Weighted Index = 85
Price Weighted Index= ($93 + $175.5 + $74)/α = $85
($93 + $175.5 + $74)/α = $85
cross multiply
$85α = ($93 + $175.5 + $74)
$85α = $342.5
α = $342.5/$85 = 4.29411765
α = 4.29
The New Divisor for the price weighted index = 4.29 (rounded off to two decimals)
