Use the following information to answer Questions 14-18. The table below reports
ID: 2771452 • Letter: U
Question
Use the following information to answer Questions 14-18. The table below reports the closing market prices (P) and shares outstanding (SO) for two stocks: ABC and XYZ. Note that stock XYZ has a 3 for 1 stock split which may, or may not, impact index construction. What divisor would we use in constructing the Price-Weighted Index at time period 1?
Period(1-3)
ABC
XYZ
P
SO
P
SO
1
45.00
110
112.00
300
2
47.00
110
119.00
300
3
49.00
110
41.33
900
a) .7156
b) 1.0833
c) 1.6930
d) 2.0000
Period(1-3)
ABC
XYZ
P
SO
P
SO
1
45.00
110
112.00
300
2
47.00
110
119.00
300
3
49.00
110
41.33
900
Explanation / Answer
Answer :- b) 1.0833
=(45 + 112) / 2
=78.5
=[( 45 + (112 / 3]
=82.3333
After Split Divisor = 82.3333 / 78.5
= 1.0833
Period ABC Stock Price XYZ Stock Price before split After split 1 45 112=(45 + 112) / 2
=78.5
=[( 45 + (112 / 3]
=82.3333
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