Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $72, $400, and $98, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index? (

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Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $72, $400, and $98, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index? (

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Solution

we have been given that,

Able, Baker, and Charlie are the only three stocks in an index.

The stocks sell for $72, $400, and $98, respectively.

If Baker undergoes a 3-for-2 stock split.

 

After split of the share of Baker  undergoes the split of 3 for2, the new price of the share after the split (which will be roughly 2/3 after the split, though not exactly) will be multiplied by 3.

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