Question

On January 4, 2019, the DJIA opened at 10,097.90. The divisor at that time was .147621194. In January 2019, Boeing was the highest-priced stock in the DJIA and Cisco was the lowest. The closing price for Boeing on January 3, 2019, was $340.90, and the closing price for Cisco was $43.47. Suppose the next day the other 29 stock prices remained unchanged and Boeing increased 3.2 percent. What would the new DJIA level be? Now assume only Cisco increased by 3.2 percent. Find the new DJIA level. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

1. DIJA if Boeing increases 3.2 percent

2. DIJA if Cisco increases 3.2 percent

Answer 1

on January 3, 2019, Boeing = $340.90, Cisco = $43.47

DJIA = 10,097.90

Divisor = 0.147621194

Index value = Value of all Shares / Divisor

Then value of shares

10,097.90 =Value of all Shares / 0.147621194

Value of all Shares = 10,097.90 * 0.147621194

Value of all Shares = 1490.664055

other 29 stock prices remained unchanged, then add the increased value of a stock to total value after divide by Divisor, then we get Index value(New DJIA level).

New DJIA level

1) if Boeing increases 3.2 percent

Increase in value of Boeing =(340.90*3.2%) = 10.9088

then, Total value of shares = 1490.664055 + 10.9088 = 1501.572855

New DJIA level = 1501.572855 / 0.147621194

New DJIA level = 10171.80

2) Cisco increases 3.2 percent

Increase in value of Cisco = (43.47*3.2%) = 1.39104

then, Total value of shares = 1490.664055 + 1.39104 = 1492.055095

New DJIA level = 1492.055095 / 0.147621194

New DJIA level = 10107.32