1. (8 points) The value-weighted index on day 0 is computed with only the three stocks A, B and C. The index value on day 0 is 100.

   1. Compute the divisor on day 0.

   2. What is the return on the value-weighted index on day 1?

   3. Stock C is split 5-for-1 after the close of Day 1. What is the divisor for the value-weighted index after the split?

   4. After the close of market on Day 1, Stock C is replaced by Stock D in the value-weighted index, and the new index is computed with only Stocks A, B and D. Compute the new divisor and the index value after this change to the index composition.

2. (2 points) The equal-weighted index on day 0 is computed with only the three stocks A, B and C. What is the return on the equal-weighted index on day 1?

d. (6 points) You plan to track each of these three indices (with only the three stocks A, B and C). Suppose you have $1,000,000 to invest on day 0, and you are allowed to buy fractional shares.

1. How many shares of each stock would you buy on day 0 to track (a) the price- weighted index (b) the value-weighted index and (c) the equal-weighted index?

2. How many shares of each stock would you buy on day 1 to track (a) the price- weighted index (b) the value-weighted index and (c) the equal-weighted index?

# shares Use data from the table below to answer this question: Day 0 Day 1 Price # shares Price Stock A 9 17,000 7 B 18 23,000 10 C 87 135 D 42 12,000 60 17,000 23,000 9,000 12,000 9,000