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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
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