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

Question

Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $36, $312, and $82, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index? (Do not round intermediate calculations. Round your answer to 5 decimal places.)

Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $36, $312, and $82, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index? (Do not round intermediate calculations. Round your answer to 5 decimal places.)

Explanation / Answer

Initial price weighted index = ($36 + $312 + $82) / 3

= $143.33

After 3-for-2 stock split, price of Baker = 2/3 * $312 = $208

So, Price weighted index = ($36 + $208 + $82) / New divisor

=> $143.33 = $326 / New divisor

=> New divisor = 2.27447

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