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098 6. The following stocks are used to construct indexes VINDX, PINDX, and ENDX described below. Current Number of Shares Stock Price Outstanding $10 400 $20 300 $30 100 3000 13,000 /1000 = 13 A) VINDX is a value-weighted index with a current level of 1,000. If A and B increase by 10% and C decreases by 20% what would be the new index level after these price changes? K 4400 6008 B 6600 2400 1020.77 13,400 13400-13000 13,000 3.10% - 1030.77 57-60 B) PINDX is a price-weighted index with a current level of 250. Stock C undergoes a 3-for-1 split before any price change. Then A and B increase by 10% and C decreases by 20%. What will be the new index level? A !! B 22 60 C 24 - 5% C) ENDX is an equal-weighted index. Why is it difficult to maintain this index? Explain by describing what adjustments the index need when A and B increase by 10% and C decreases by 20%. A 10 11 B 20 22 10+ 0 + (-20) c 30 24 . You are bearish on Rock Bottom (ROBO) stock. It is currently trading at $50 per share. You have $10,000 and want to short as much of the stock as you can. The initial marga requirement for shorting is 40%6. The broker does not pay any interest on funds you keep in your account. AJ How many shares can you short, if you use all your funda? 10000 - 200 shares MV: 10000 1+ 40% MU=7142.86 10,000 x 4% - 4000 B) Within the first week of your investment ROBO stock price comes within 10 cents of generating a margin call. What must be the trading price for ROBO at that point? The maintenance margin requirement on short sales is 25%. MV 3500 - 200P C.256 14,000 250P: 14,000 250 $56 C) One month after you short ROBO, the share price is down by 20% and the company pays a cash dividend of $2 per share. You close out your position that day. What is your percentage return? 8,000 -2 50- 20% = 440 x 200 2x 200-400 8400-10000 .- -16% - -16% 10,000