In: Finance
(ii) The market consists of the following stocks. Their prices and number of shares are as follows:
Stock Price Number of Shares Outstanding
A $10 100,000
B 20 10,000
C 30 200,000
D 40 50,000
a. What is the aggregate market value if a S&P 500 type of measure of the market (value-weighted average) is used?
b. The price of Stock C doubles to $60. What is the percentage increase in the market if a S&P 500 type of measure of the market (value-weighted average) is used?
c. Repeat question (b) but use a Value Line type of measure of the market (i.e., a geometric average) to determine the percentage increase.
d. Suppose the price of stock B doubled instead of stock C. How would the market have fared using the aggregate measures employed in (b) and (c)? Why are your answers different?