a) Determine the intial level of a value weighted index made up of GM and Ford u
ID: 2637947 • Letter: A
Question
a) Determine the intial level of a value weighted index made up of GM and Ford using a divisor of 1000
b) if GM experiences a -8% decline in price over the week and ford experince a 6% increase in price over the next week, calculate the change in the value of the index
c) if two weeks from now, GM is dropped from the index and is replaced by Buick at a price of $30/share with 4000 shares outstanding, calculate the new divisor. ( hint: you need to use the level found in part B to determine the new divisor)
stock current price # of shares outstanding GM 25 8000 Ford 45 15000Explanation / Answer
stock Price No. of Share Value GM $25.00 8000 $200,000.00 Ford $45.00 15000 $675,000.00 $875,000.00 stock GM Ford Weighted Index 228.57 771.43 stock New Price No. of Share Value GM $23.00 8000 $184,000.00 Ford $47.70 15000 $715,500.00 $899,500.00 stock GM Ford Weighted Index 204.56 795.44
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