Question
Hi I do not understand this question The prices of Stocks A and B in Year 1 were $45 and $85, respectively. The corresponding prices
Hi I do not understand this question
The prices of Stocks A and B in Year 1 were $45 and $85, respectively. The corresponding prices in Year 2 were $30 and $90, respectively. The price of Stock B was lower because of a two or one stock split. The divisor to be used for calculating the price-weighted index of the two prices in year 2 is 1.35 (correct answer)
The working process: The price weighted index in year 1 is (45+85)/2=65. The price of stock B after the stock split should be $85/2-$42.5
The divisor d must be such that (45+85/2)/d={={45+85)/2 Hence d=(45+85/2)/65=1.3461538461538
I do not understand how to get d or the 1.3461538461538. Please help me
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