Consider the following three stocks: Stock Price Number of shares outstanding Stock A $ 40 200 Stock B $ 70 500 Stock C $ 10 600 Assume at these prices that the value-weighted index constructed with the three stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1? A) 265 B) 430 C) 355 D) 490 E) 1000
Consider the following three stocks: Stock Price Number of shares outstanding Stock A $ 40 200 Stock B $ 70 500 Stock C $ 10 600 Assume at these prices that the value-weighted index constructed with the three stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1? A) 265 B) 430 C) 355 D) 490 E) 1000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Consider the following three stocks:
|
Stock |
Price |
Number of shares outstanding |
||||
|
Stock A |
$ 40 |
|
|
200 |
|
|
|
Stock B |
$ 70 |
|
|
500 |
|
|
|
Stock C |
$ 10 |
|
|
600 |
|
|
|
|
Assume at these prices that the value-weighted index constructed with the three stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1?
A) 265
B) 430
C) 355
D) 490
E) 1000
Please Provide Justification
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