Question

You construct a price-weighted index of 33 stocks. At the beginning of the day, the index is 9,241.90. During the day, 32 stock prices remain the same, and 1 stock price increases $4.10. At the end of the day, your index value is 9,267.86. What is the divisor on your index? (Do not round intermediate calculations. Round your answer to 8 decimal places.)

Answer #1

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Assume that you construct a price weighted index of 30 stocks.
The sum of the prices of these stocks is $4000. The divisor for
this index is 30, and the value of this index is 100. Now assume
that one of the 30 stocks, with an average price of $400, has a
four-for-one stock split while the value of other stocks remains
unchanged.
a) If you make no adjustments to the index, what will be the new
value of the...

Problem 5-1 Price-Weighted Divisor (LO4, CFA2)
Able, Baker, and Charlie are the only three stocks in an index.
The stocks sell for $38, $200, and $106, respectively. If Baker
undergoes a 3-for-2 stock split, what is the new divisor for the
price-weighted index? (Do not round intermediate
calculations. Round your answer to 5 decimal places.)

You are given the following information regarding prices for a
sample of stocks.
PRICE
Stock
Number of Shares
T
T + 1
A
3,800,000
$68
$88
B
12,000,000
24
34
C
29,000,000
19
27
Construct a price-weighted index for these three
stocks, and compute the percentage change in the index for the
period from T to T + 1. Do not round intermediate
calculations. Round your answer to two decimal places.
%
Construct a value-weighted index for these three
stocks,...

A price-weighted index consists of stocks A, B, and C which are
priced at $38, $24, and $26 a share, respectively. The current
index divisor is 2.7. What will the new index divisor be if stock B
undergoes a 3-for-1 stock split? (Round your final answer to four
decimal points.)

A price-weighted index consists of four stocks. Here are their
prices: PA=$ 10; PB=$ 25; PC= $
24; PD= $ 36
Stock C has a 3:1 stock split. What will be the new divisor?
(Round your answer to two decimals)

Problem 5-4 Price-Weighted Index (LO4, CFA2)
Assume the following information concerning two stocks that make
up an index. What is the price-weighted return for the index?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places.)
Price per Share
Shares Outstanding
Beginning of Year
End of Year
Kirk, Inc.
36,000
$
43
$
47
Picard Co.
26,500
74
83
RETURN __________ %

In addition to price-weighted and value-weighted indexes, an
equally weighted index is one in which the index value is computed
from the average rate of return of the stocks comprising the index.
Equally weighted indexes are frequently used by financial
researchers to measure portfolio performance.
The following three defense stocks are to be combined into a
stock index in January 2016 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance):
Price
Shares
(millions)...

In addition to price-weighted and value-weighted indexes, an
equally weighted index is one in which the index value is computed
from the average rate of return of the stocks comprising the index.
Equally weighted indexes are frequently used by financial
researchers to measure portfolio performance. The following three
defense stocks are to be combined into a stock index in January
2016 (perhaps a portfolio manager believes these stocks are an
appropriate benchmark for his or her performance): Price Shares
(millions)...

In addition to price-weighted and value-weighted indexes, an
equally weighted index is one in which the index value is computed
from the average rate of return of the stocks comprising the index.
Equally weighted indexes are frequently used by financial
researchers to measure portfolio performance. The following three
defense stocks are to be combined into a stock index in January
2019 (perhaps a portfolio manager believes these stocks are an
appropriate benchmark for his or her performance): Price Shares
(millions)...

Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last period.
P0
Q0
P1
Q1
P2
Q2
A
86
100
91
100
91
100
B
46
200
41
200
41
200
C
92
200
102
200
51
400
a. Calculate the rate of return on a
price-weighted index of the three stocks for the first period
(t = 0 to t...

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