Question

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?

Answer 1

price divisor after split is 4.5

Step-by-step explanation:

given data

stock prices = $10

stock prices = $20

stock prices = $80

stock prices = $50

stock prices = $40

solution

we find here first price weighted index for all 5 stock that is

price weighted index =
`(10+20+80+50+40)/(5)`

price weighted index = $40

so

price weighted index before split is $40

so after split last stock became half

so new price divisor

we consider denominator to be x

so

40 =
`(10+20+80+50+40)/(x)`

x =
`(10+20+80+50+40)/(40)`

x = 4.5

so price divisor after split is 4.5