The Market Consists of the Following Stocks

question 39

Essay

The market consists of the following stocks. Their prices and number of shares are as follows:
    Stock         Price   Number of Shares Outstanding
      A            $10              100,000
      B             20               10,000
      C             30              200,000
      D             40               50,000

a. The price of Stock C doubles to $60. What is the percentage increase in the market if a S&P 500 type of measure of the market (value-weighted average)is used?

b. Repeat question (a)but use a Value Line type of measure of the market (i.e., a geometric average)to determine the percentage increase.

c. Suppose the price of stock B doubled instead of stock C. How would the market have fared using the aggregate measures employed in (a)and (b)? Why are your answers different?

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Definitions:

Values

Core beliefs or standards that guide and motivate attitudes and actions.

Moral Behavior

Actions that align with societal, cultural, or personal norms of right and wrong, often involving considerations of fairness, justice, and ethics.

Sarbanes-Oxley Act

A U.S. law enacted in 2002 aimed at protecting investors from fraudulent accounting activities by corporations, thereupon enhancing corporate governance and financial transparency.