Question

1) A market value weighted index has three stocks in it, priced at 70.6, 66.4, and 92.3 per share, and each firm has 203, 408 and 426 thousand shares outstanding, respectively. The value of the index today is 546. Over the course of a month, the market does its random walk-y thing, and the prices of the three stocks change do 80.4, 52.6, 64.9, respectively. What is the new value of the index?

Enter answer accurate to two decimal places.

2)

A market value weighted index has three stocks in it, priced at 54.4, 93.5, and 54 per share, and each firm has 288, 437 and 237 thousand shares outstanding, respectively. The value of the index today is 513. At this time, the third stock undergoes a 3 for 1 stock split. What is the new value of the index?

Enter answer accurate to two decimal places.

Answer 1

1) Market weighted index = [ New Capitalization / Old Capitalization ] * Old Index

Stocks	Old Price	New Price	Number of Shares	Old Capitalization	New Capitalization
1	70.6	80.4	203000	14331800	16321200
2	66.4	52.6	408000	27091200	21460800
3	92.3	64.9	426000	39319800	27647400
				80742800	65429400

New Index = [ 65429400 / 80742800 ] * 546

                = 442.45

2)

New Price of Stock 3 = Old price * Stock Split ratio

                               = 54 * 1/3

                               = 18

New Number of shars Stock 3 = 237000 * 3

                                            = 711000

Stocks	Old Price	New Price	Number of Shares - Old	Number of Shares - New	Old Capitalization	New Capitalization
1	54.4	54.4	288000	288000	15667200	15667200
2	93.5	93.5	437000	437000	40859500	40859500
3	54	18	237000	711000	12798000	12798000
					56526700	56526700

New Index = [ 56526700 / 56526700 ] * 513

                = 513