Question: Consider a hypothetical price-weighted index created using the three stocks below: Stock Price before split Price after split Outstanding Shares (mil) before split Outstanding Shares

Consider a hypothetical price-weighted index created using the three stocks below:

Stock

Price before split

Price after split

Outstanding Shares (mil) before split

Outstanding Shares (mil) after split

X

$10

$10

400

400

Y

$40

$40

100

100

Z

$200

$50

10

40

Yesterday before market close, Stock Z has completed a 4-for-1 split. Prices before and after the split are listed above. Before the split, you were holding 100 shares of each of the stocks.

After Stock Zs 4-for-1 split, you realize that you need to adjust the portfolio so that it can stay price-weighted. To do so, you will need to [ Select ] ["buy", "sell"] [ Select ] ["100", "150", "250"] shares of Stock X, [ Select ] ["buy", "sell"] [ Select ] ["100", "250", "150"] shares of Stock Y, and [ Select ] ["buy", "sell"] [ Select ] ["150", "100", "250"] shares of Stock Z.

Right before Stock Zs split, the divisor of the price-weighted index is 3. After the split, the new divisor is [ Select ] ["1.2", "2.6", "3", "4.2"] .

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