Context: As of August 31, 2020, the Dow Jones index is changing its composition by replacing the following three components:

Salesforce (CRM) replaces Exxon Mobil (XOM)

Amgen (AMGN) replaces Pfizer (PFE)

Honeywell International (HON) replaces Raytheon Technologies (RTX)

The tab "DJIA" in the Excel file "Indexes" gives you the list of the stocks in the DJIA index, their sector, their share price, and their weight (before and after the change in the index composition).

Question 1. The press release mentions that the move was prompted by Apple's decision to split its stock 4:1 on August 31^st, 2020. Since the DJIA is a price-weighted index, this means that Apple will have a lower weight in the index after the split. Verify this by answering the following questions:

What was the weight of Apple in the DJIA index on August 28, 2020? ______________

What was the weight of Apple in the DJIA index on August 31, 2020? ______________

Question 2. Stocks are classified in 11 Global Industry Classification Standard (GICS) sectors:

1.Energy

2.Materials

3.Industrials

4.Consumer Discretionary

5.Consumer Staples

6.Health Care

7.Financials

8.Information Technology

9.Communication Services

10.Utilities

11.Real Estate

Apple is in the Information Technology sector. One of the arguments for changing the composition of the index on August 31, 2020 is that Apple's split would reduce the index allocation to the Information Technology sector. The sectors of the stocks in the DJIA index are given to you in the tab "DJIA" of the "Indexes" Excel Worksheet.

What was the weight of Information Technology stocks on August 28, 2020? (Use Excel to add the weights. Don't use your calculator as I want to check your ability to add in Excel.)

______________

What would be the weight of Information Technology stocks on August 31, 2020 without the addition of the three new stocks? (Again, use Excel to add the weights.) ______________

Out of the three stocks added to the DJIA index (CRM, AMGN, HON), which one(s) are classified in the Information Technology sector? ______________

Question 3. With the DJIA index methodology, the stocks with the highest share prices have more weight (higher rank).

What was the rank of Apple in the index on August 28, 2020? ______________

What was the rank of Apple in the index on August 31, 2020? ______________

What were the ranks of the three companies that have been dropped from the index?

Exxon Mobil: ______________

Pfizer: ______________

Raytheon Technologies: ______________

Which stocks have the top three ranks after the change in the index on August 31, 2020?

Rank #1: ______________

Rank #2: ______________

Rank #3: ______________

Question 4: The news of the changes in the DJIA index was released on August 25, 2020. What was the change in the prices of the stocks affected that day? (Compute the difference by subtracting the prices on August 24, 2020 from the prices on August 25, 2020. There are several websites that give you free price data on stocks. I will give you an example with Yahoo! Finance before the activity: 1) go to https://finance.yahoo.com, 2) in the search box type the stock ticker, select the tab "Historical Data," and 3) use the numbers in the column "Close." For this part of the activity, you can divide the six stocks among the studentstwo stocks per student.

Stock

Price on August 24, 2020

Price on August 25, 2020

Change

Salesforce (CRM)

______________

______________

______________

Amgen (AMGN)

______________

______________

______________

Honeywell International (HON)

______________

______________

______________

Exxon Mobil (XOM)

______________

______________

______________

Pfizer (PFE)

______________

______________

______________

Raytheon Technologies (RTX)

______________

______________

______________

Question 5. What was the price of Salesforce (CRM) on August 26, 2020? ______________

Question 6. The S&P 500 index has a different methodology where weights are based on the market capitalization of the stocks. The tab "S&P 500" in the Excel file "Indexes" gives you the market capitalizations of the stocks in the index. Which three stocks should have the largest weights in the index? (Hint: You can use "Sort" in the "Data" tab to help you identify the stocks.)

Rank #1: ______________

Rank #2: ______________

Rank #3: ______________