Question

Return to qe Problem 5-11 DJIA (LO4, CFA2) points On October 28, 2015, the DJIA opened at 12,719.01. The divisor at that time was 0132457265. In October 2015, Goldman Sachs was the highest priced stock in the DJIA and Cisco was the lowest. Assume the closing price for Goldman Sachs on October 27, 2015, was $27148, and the closing price for Cisco was $14.78. Suppose the next day the other 29 stock prices remained unchanged and Goldman Sachs increased 3.6 percent. What would the new DJIA level be? Now assume only Cisco increased by 36 percent. Find the new DJIA level. (Do not round Intermediate calculations, Round your answers to 2 decimal places.) Answer is not complete. DJA Goldman Sachs increases 36 percent DJIA I Cisco increases 36 percent 12,792.79

Answer 1

The value of Cisco = 14.78$

Now what will the increase in Cisco price = 14.78$*3.6%

= 0.53208$

Increase in DJIA = Increase in Cisco/ Divisor

= 0.53208$/0.132457265

= 4.02

New DJIA = 12719.01+4.02 = 12723.03

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