Here is a question with the answers. I have two questions.

1. Where do the numbers (10+20) come from for the new divisor. My professer said they are after split stock prices but I do not understand that.

2. Will X = .86 be given on the exam, if not where do we get that number from?

3. A price-weighted index series is composed of two stocks A and B. In day 1, the closed prices of A and B is S10 and S60 per share. Before market opens in day 2, stock B completes a three-for-one stock split. In day 2, the closed prices for A and B are $15 and S25. (a) Compute the value of index in the end of day 2 Index before the split: (10 60) /2 35; New divisor: [(10 20) / X]-35; X 0.86. Index after the split = (15 + 25) / 0.86-46.51. (b) Compute the index return from day 1 to day 2. return (46.51 - 35)/35 0.33