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 $38, $200, and $106, 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 $38, $200, and $106, 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

Calculate the number of shares after the stock split as follows:

Number of shares = selling price * reverse of the stock split                                  …… (1)

Substitute the following values in equation (1) to calculate the number of shares:

Selling price of share bake is $ 200.

Stock split is 3 for 2.

Therefore number of shares = 200 * 2/3

=133.33

Therefore the number of shares is 133.33.

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