HW02 - Bus261 Homework Assignment #2 2. Assume the...

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Bus261 Homework Assignment #2 2. Assume the following stocks make up a value-weighted index: a . Compute the total market value and the weights assigned to each stock. Corporation Shares Price Total Market Value Weighting Maris 6,000 $30 6,000 * $30 = $180,000 (180000/882000)*100% = 20% Mantle 14,000 $5 14,000 * $5 = $70,000 (14000/882000)*100% = 8% Howard 4,000 $8 4,000 * $8 = $32,000 (32000/882000)*100% = 4% Richardson 30,000 $20 30,000 * $20 = $600,000 (600000/882000)*100% = 68% $882,000 100% b . Assume the price of the shares of the Howard Corporation go up by 50%, while those of the Richardson Corporation go down by a mere 10%. The other two stocks remain constant. What will be the newly established value for the index? Howard: $8*1.5 = $12, increases to $12 Richardson: $20*0.10 = $2, decreases by $2 to $18 New value: $180,000 + $70,000 + (4,000 * $12) + (30,000 * $18) = $838,000 c . Explain why the index followed the pattern it did in part b .
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This note was uploaded on 05/10/2010 for the course BUS 261 taught by Professor Shi during the Spring '10 term at Diablo Valley College.

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HW02 - Bus261 Homework Assignment #2 2. Assume the...

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