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# Price-Weighted Divisor for the price-weighted index

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There is a stock index that holds only three stocks known as A, B and C. In sequential order they sell for \$50.00, \$100.00 and \$150.00.

a) If B undertakes a 2 for 1 stock split, what is the new divisor for the price-weighted index?

b) If B undertakes a 3 for 1 stock split, what is the new divisor for the price-weighted index?

Please show all calculations in-depth needed to acquire the answers to these problems.

##### Solution Summary

Solution describes the steps to calculate Price-Weighted Divisor for the price-weighted index.

##### Solution Preview

See the attached file.
a) If B undertakes a 2 for 1 stock split, what is the new divisor for the price-weighted index?

The new divisor is calculated (using prices adjusted for the split) such that the average after split is unchanged from average before split.
Average price before ...

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###### Education
• BEng (Hons) , Birla Institute of Technology and Science, India
• MSc (Hons) , Birla Institute of Technology and Science, India
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