Use the following information to answer Questions 14-18. The table below reports
ID: 2771476 • Letter: U
Question
Use the following information to answer Questions 14-18. The table below reports the closing market prices (P) and shares outstanding (SO) for two stocks: ABC and XYZ. Note that stock XYZ has a 3 for 1 stock split which may, or may not, impact index construction.What is the value of the Value-Weighted Index as of Period 3?
Period
ABC
XYZ
P
SO
P
SO
1
45.00
110
112.00
300
2
47.00
110
119.00
300
3
49.00
110
41.33
900
a) 91.56
b) 92.21
c) 110.47
d) 136.88
Period
ABC
XYZ
P
SO
P
SO
1
45.00
110
112.00
300
2
47.00
110
119.00
300
3
49.00
110
41.33
900
a) 91.56
b) 92.21
c) 110.47
d) 136.88
Explanation / Answer
Value weighted index as of period 3 = [$49*110 + $41.33*900] / [$45*110 +$112*300] * 100
= 110.47 which is option (c)