 Business
14 April, 10:09

# 77. The Hydro Index is a price weighted stock index based on the 5 largest boat manufacturers in the nation. The stock prices for the five stocks are \$10, \$20, \$80, \$50 and \$40. The price of the last stock was just split 2 for 1 and the stock price was halved from \$40 to \$20. What is the new divisor for a price weighted index

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1. 14 April, 11:23
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1. The stock prices for the five stocks before the split is \$40

2. The new divisor for a price weighted index is \$ 4.5 after the split

Step by Step Explanation:

1.

Price weighted index = 10+20+80+50+40/5

Price weighted index = 40

Therefore, the price-weighted index before the split is 40.

2. After the split, the last stock became half to the original value. The value of last stock before the split is \$40 and after the split is \$20.

To find the new price divisor, let assume the denominator is X.

40=10+20+80+50+20/X

Therefore X=10+20+80+50+20/40

X = \$4.5

Therefore, the new price divisor for the price-weighted index after the split is \$4.5