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A benchmark index has three stocks priced at $ 2 1 , $ 3 2 , and $ 4 5 yesterday. The number of outstanding
A benchmark index has three stocks priced at $$ and $ yesterday. The number of outstanding shares for each is shares, shares, and shares, respectively. If this index is value weighted and had a value of yesterday and the prices changed to $$ and $ what is the new index value? Hint: First multiply the shares outstanding of each stock by its price to the total market capitalization of each stock. Next, sum up the market capitalizations of all stocks in the index. Then find the market capitalizations of all stocks in the index with the new stock prices. Finally, use the formula: New index value New total index market capitalization Original total index market capitalization x Original index value.
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