Knowee
Questions
Features
Study Tools

A price-weighted index series is composed of the following three stocks:Price before Split Price after SplitStock End of Day 1 End of Day 2X $10 $12Y $20 $19Z $60 $22If stock Z completes a three-for-one split at the end of Day 1, the value of the index after the split (at the end of Day 2) is closest to:31.7.32.3.29.9.

Question

A price-weighted index series is composed of the following three stocks:Price before Split Price after SplitStock End of Day 1 End of Day 2X 1010 12Y 2020 19Z 6060 22If stock Z completes a three-for-one split at the end of Day 1, the value of the index after the split (at the end of Day 2) is closest to:31.7.32.3.29.9.

🧐 Not the exact question you are looking for?Go ask a question

Solution

The language of the text is English.

To calculate the value of the price-weighted index after the split, we need to follow these steps:

  1. Calculate the sum of the prices of the stocks at the end of Day 1: 10(X)+10 (X) + 20 (Y) + 60(Z)=60 (Z) = 90.

  2. Divide this sum by the number of stocks to get the value of the index at the end of Day 1: 90/3=90 / 3 = 30.

  3. Adjust the price of stock Z for the split. Since it was a three-for-one split, the new price is 60/3=60 / 3 = 20.

  4. Calculate the sum of the prices of the stocks at the end of Day 2, using the adjusted price for stock Z: 12(X)+12 (X) + 19 (Y) + 22(Z)=22 (Z) = 53.

  5. Divide this sum by the number of stocks to get the value of the index at the end of Day 2: 53/3=53 / 3 = 17.67.

So, the value of the index after the split (at the end of Day 2) is closest to 17.67. However, this is not one of the options provided. There seems to be a mistake in the question or the options provided.

This problem has been solved

Similar Questions

Identify two price indices.

Suppose Stocks A, B and C are the only three component stocks in a benchmark index. The number of shares outstanding of Stocks A, B and C are 360,000 shares, 308,000 shares, and 221,000 shares, respectively.  The prices of Stocks A, B and C for Days 1, 2, 3 and 4 are given in the table below:   Stock AStock BStock CDay 131.1282.5876.73Day 232.2844.0175.59Day 33241.178.73Day 433.7842.9579.16 Stock B had a 2-for-1 stock split on Day 2, which explained the drop in the price of Stock B.If the benchmark value-weighted index was 1506.26 on Day 1, the benchmark value-weighted index on Day 3 was Answer Question 2. (Note: Answer must be correct to 2 decimal places, but you may leave your answer with more than 2 decimal places.)

Which of the following index methodologies describes assigning a higher (lower) weight to stocks with higher (lower) prices?a. Technical analysisb. Value-weightingc. Fundamental analysisd. Equal-weightinge. Price-weighting

The following are prices and consumption quantities for three commodities in 2009 and 2019: Commodity 2009 2019 Price Quantity Price Quantity A $2 15 $5 17 B $32 4 $28 3 C $5 20 $7 15 Based on the above information, calculate the unweighted aggregate price index for 2019 using 2009 as the base year. Round your final answer to two decimal places.

A company has just announced a 3-for-1 stock split, effective immediately. Prior to thesplit, the company had a market value of $5 billion with 100 million shares outstanding.Assuming the split conveys no new information about the company, what are the value ofthe company, the number of shares outstanding, and the price per share after the split? Ifthe actual market price immediately following the split is $17.00 per share, what does thistell us about market efficiency?

1/1

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.