Question

You are given the following information concerning two stocks that make up an index.

Assume that you want to reindex with the index value at the beginning of the year equal to 100. What is the index level at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

					Price per Share
	Shares Outstanding				Beginning of Year				End of Year
Kirk, Inc.		38,000			$	61			$	67
Picard Co.		27,500				113				119

Index Level: _____________

Answer 1

The index level is computed as shown below:

= [ (Number of shares of Kirk Inc x End of year price per share + Number of shares of Picard Co x End of year price per share) / (Number of shares of Kirk Inc x Beginning of year price per share + Number of shares of Picard Co x Beginning of year price per share) ] x 100

= [ (38,000 x $ 67 + 27,500 x $ 119) / (38,000 x $ 61 + 27,500 x $ 113) ] x 100

= ($ 5,818,500 / $ 5,425,500) x 100

= 107.24 Approximately

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