Assume the following stocks make up a value-weighted index:

Corporation Shares Outstanding Market Price

Akme 6,000 30

Mavis 14,000 5

Hower 7,000 8

Roys 40,000 20

1. Calculate the weights assigned to each stock.
2. Assume the price per share of Hower increases by 50 percent, that of Roys goes down by 10 percent, and the other two stock prices remain constant. What is the value of the new index? Explain why the index followed the pattern it did.