Question

1. Consider the following three stocks:

                         Stock              Price          Number of shares outstanding

     

                        Apple               $240                             100

                        MSFT              $152                             200

                        Boeing             $130                             300

    

1. Calculate the price-weighted index constructed with the three stocks using a divisor of 0.165897
2. How would the divisor (in part (a) above) change if Boeing pays 20 percent stock dividend and the stock of MSFT is split 3 for 1?
3. Calculate the Value-weighted index constructed with the three stocks using a divisor of 100.
4. How would the divisor (in part (a) above) change if Boeing pays 20 percent stock dividend and the stock of MSFT is split 3 for 1?

Answer 1

Poce weighled pace Index = { stocks Price - Divisor - 40 + 152 + 130 o.165897 3,166.53 = Stock Pnch New Pne pela २५० २५० MSFT 152 50.667 ~ as 3 for 1 split Boeing 130 108.334 , price should be divided by 3 20%. Stock dividend . means isswing 20 shares for each 100 shores. Sikhilarly like (120/100 6 for 5 split. So original price ! should be multiplied by (5) E New price = 240+ 50.667 + 108.334 - 399 Jet new divisor be x,... And Price weighted Index should be some in - both case, :. 3146.53 = 399 . 2- ių 0.126806 399. 3146.53

. " value weighted Index. minimit Stock Price २५ २५0 MEST 152 - Boeing...130 shares 100 200 300 Market Cap. २५००० 30400 3.90oo gooo - value Weighted Index = E Masket of Divisor 24000 + 304 do + 39 000 - hii It is not ] This is = 934 affected by Stocks' splits. part is same as part (6) [ -

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