Assume the Following Five Companies Are Used in Computing an Index

question 33

Essay

Assume the following five companies are used in computing an index (there have been no stock splits during this time). $\begin{array}{ccc} && \text { Base Period } & \text { Current Period } \\&\text { Shares } & \text { January 1, 1977 } & \text { December 31, 2004 } \\\text { Company }&\text { Outstanding } & \text { Market Price } & \text { Market Price }\\\hline\text { A } & 2,000 & \$ 2.00 & \$ 14.00 \\\text { B } & 6,000 & 6.00 & 18.00 \\\text { C } & 5,000 & 9.00 & 23.00 \\\text { D } & 8,000 & 10.00 & 5.00 \\\text { E } & 1,000 & 13.00 & 40.00\end{array}$ (a)If the index is price-weighted,what will be the value of the index on Dec.31,2004?
(b)Using the same data from the above table,determine the index value if the index is calculated on a value-weighted basis.

---

Definitions:

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values, indicating how spread out the data points are from the mean.

Normally Distributed

A statistical term describing a bell-shaped distribution of data, where most values cluster around a central mean and probabilities for values taper off symmetrically towards the extremes.

IQ Scores

Quantitative evaluations obtained from uniform exams aimed at assessing human intelligence and cognitive skills.

Positive Correlation

A correlation between two variables where they both change in the same way.