Question

What is the divisor for the price weighted index at time 0? (before the announcement of the dividend and splits?

What is the divisor for the price weighted index at time 1?

What is the equally weighted index return?

Table 1: Component stocks of Index X Stocks PO QO Rtn1 Stock split Stock dividend (see notes) (see notes) A 40 10 15% No No B 30 20 -10% No No 90 10 5% No 50% D 60 20 10% 3 for 1 No Notes: PO is the stock price at time 0; QO is the shares outstanding at time 0. Q1 is the shares outstanding at time 1. Rtn1 is the return between time 0 and time 1, which is defined as: rtn1=(P1-PO)/PO, whereas P1 is the stock price at time 1. For stock dividend, 50% means that if you have 10 shares at time 0, after the stock dividend, you are given another 5 shares (you hold 15 shares). For stock split, 3 for 1 means that if you have 1 shares at time 0, then after the stock dividend, you hold 3 shares. Assume that at time 0 index X is 200 points. Which of the following statements are correct? The market value of stock D will be tripled after the stock split since the split factor is 3 for 1. The price for stock D will be $66 per share at time 1 since the return is 10%. The shares outstanding for stock C will be 15 at time 1 since there is a 50% stock dividend. O Stock C has the largest impact on the value weighted index since stock C has the highest stock price