Question

An index consists of three stocks (A, B, C). The prices of these three stocks are $45, $126, and $64, respectively. If Stock B has a 3-for-1 stock split, what is the new index divisor?

Answer 1

	New Index Divisor
	= Sum of 3 Stock Prices after Split / Price Index
	Where,
	Price of Stock A = $45
	Price of Stock B = Price / Stock Split = $126 / 3 = $42
	Price of Stock C = $64
	Price Index
	= Stock Prices before Split / No of Stock
	= ($45 + $126 + $64) / 3
	= $235 / 3
	= $78.33
	So,
	New Index Divisor
	= Sum of 3 Stock Prices after Split / Price Index
	= ($45 + $42 + $64) / $78.33
	= $151 / $78.33
	= 1.93
	New Index Divisor = 1.93