1.Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $39, $315, and $118, respectively. If Baker undergoes a 2-for-1 stock split, what is the new divisor for the price-weighted index? (Round your answer to 6 decimal places.)

Divisor

2.You construct a price-weighted index of 42 stocks. At the beginning of the day the index is 7,784.63. During the day, 41 stock prices remain the same, and one stock price increases $1.00. At the end of the day, your index value is 7,827.75. What is the divisor on your index? (Round your answer to 8 decimal places.)

Divisor

3. In addition to price-weighted and value-weighted indexes, an equally weighted index is one in which the index value is computed from the average rate of return of the stocks comprising the index. Equally weighted indexes are frequently used by financial researchers to measure portfolio performance.

The following three defense stocks are to be combined into a stock index in January 2010 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance):

	Price
	Shares (millions)		1/1/10			1/1/11			1/1/12
Douglas McDonnell	535		$	89		$	94		$	109
Dynamics General	450			70			65			79
International Rockwell	230			99			88			105

a.	Compute the rate of return on an equally weighted index of the three defense stocks for the year ending December 31, 2010. (Negative amounts should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Index return

%

b.	If the index value is set to 100 on January 1, 2010, what will the index value be on January 1, 2011?(Round your answer to 2 decimal places.)

Index value

c.	What is the rate of return on the index for 2011? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Index return

%

4. Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $39, $315, and $118, respectively. If Baker undergoes a 2-for-1 stock split, what is the new divisor for the price-weighted index? (Round your answer to 6 decimal places.)

Divisor

Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $96, $315, and $114, respectively. If Able undergoes a 2-for-4 reverse stock split. What is the new divisor? (Round your answer to 6 decimal places.)

Divisor