My question is for B&C, why the price-weighted doesn't change after stock split? If the price get split, the single price for each stock will change so the price index will change, and I think only the market value weighted doesn't change after stock split??? Also why the divisor get changed? there are only 3 stocks so the divisor should be 3 forever??

Based on the information given, for a price-weighted index of the three stocks calculate

A. the rate of return for the first period (t = 0 to t = 1). B. the value of the divisor in the second period (t = 2). Assume that Stock A had a 2-1 split during this period. C. the rate of return for the second period (t = 1 to t = 2).

A. The price-weighted index at time 0 is (70 + 85 + 105)/3 = 86.67. The price-weighted index at time 1 is (72 + 81 + 98)/3 = 83.67. The return on the index is 83.67/86.67 - 1 = -3.46%. Answer B. The divisor must change to reflect the stock split. Because nothing else fundamentally changed, the value of the index should remain 83.67. So the new divisor is (36 + 81 + 98)/83.67 = 2.57. The index value is (36 + 81 + 98)/2.57 = 83.67. Answer C. The rate of return for the second period is 83.67/83.67 - 1 = 0.00%.