Consider a value-weighted market index that includes the following two companies
ID: 2762994 • Letter: C
Question
Consider a value-weighted market index that includes the following two companies. Answer the following questions.
A. What is the total value of the two companies' shares in day 1?
B. What is the total value of the two companies' sharea in day 2?
C. What is the percentage change in the index market from day 1 to day 2? HINT: The percentage change of a value-weighted index is just the percentage change in the total value of the stocks in the index.
Company 1 Company 2 Day price number of shares price number of shares 1 $9 600 $8 1,600 2 $10.35 600 $8.56 1,600Explanation / Answer
Company 1 Company 2 Day price number of shares price number of shares 1 $9 600 $8 1,600 2 $10.35 600 $8.56 1,600 A. the total value of the two companies' shares in day 1 Price/share No of share Value[Price/sh*no. of sh] Company 1 9 600 5400 Company 2 8 1600 12800 Total value of share in Day 1 18200 B the total value of the two companies' shares in day 2 Price/share No of share Value[Price/sh*no. of sh] Company 1 10.35 600 6210 Company 2 8.56 1600 13696 Total value of share in Day 2 19906 C the percentage change in the index market from day 1 to day 2 Total value of share in Day 1 18200 Total value of share in Day 2 19906 Difference 1706 %age change [ 1706/18200*100] 9.37