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The TriValue Index is a market value weighted index comprising of three stocks. The number of...

The TriValue Index is a market value weighted index comprising of three stocks. The number of shares outstanding and the closing stock prices for each of the stocks are given as follows:

Number of shares outstanding Closing price yesterday Closing price today

Stock A 350,000 $23 $23

Stock B 405,000 $43 $41

Stock C 553,000 $56 $58

The number of shares outstanding for the stocks does not change during the period. If the index was closed at 970 yesterday, what is the new index value at market close today?

Expert Solution

Price of Stock A yesterday = $23

Number of shares outstanding of Stock A yesterday = 350,000

Market value of Stock A = Price * Number of Shares = 23*350,000 = $8,050,000

Price of Stock B yesterday = $43

Number of shares outstanding of Stock B yesterday = 405,000

Market value of Stock B = Price * Number of Shares = 43*405,000 = $17,415,000

Price of Stock C yesterday = $56

Number of shares outstanding of Stock C yesterday = 553,000

Market value of Stock C = Price * Number of Shares = 56*553,000 = $30,968,000

Market Value of the Index Yesterday = Market value of Stock A + Market value of Stock B + Market value of Stock C

= $8,050,000 + $17,415,000 + $30,968,000 = $56,433,000

Price of Stock A today = $23

Number of shares outstanding of Stock A today = 350,000

Market value of Stock A = Price * Number of Shares = 23*350,000 = $8,050,000

Price of Stock B today = $41

Number of shares outstanding of Stock B today = 405,000

Market value of Stock B = Price * Number of Shares = 41*405,000 = $16,605,000

Price of Stock C today = $58

Number of shares outstanding of Stock C today = 553,000

Market value of Stock C = Price * Number of Shares = 58*553,000 = $32,074,000

Market Value of the Index today = Market value of Stock A + Market value of Stock B + Market value of Stock C

= $8,050,000 + $16,605,000 + $32,074,000 = $56,729,000

Index Value yesterday = 970

Index Value today = Index Value yesterday *(Market Value of the Index today / Market Value of the Index Yesterday)

= 970 *($56,729,000 / $56,433,000) = 970*1.005245158 = 975.09

jeff jeffy answered 2 years ago

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