Price vs$.$ Value$-$Weighted Indexes

Two stock indexes, one price$-$weighted average and one value$-$weighted index, are to be created from the following three stocks: Lifestyle Retail $($share

price $=$$$25\mathrm{.}05,$ shares outstanding $=15\mathrm{.}55$ million$),$ Frenzy Fast Food $($share price $=$$$33\mathrm{.}90,$ shares outstanding $=1,291\mathrm{.}00$ million$),$ and Mango Tech,

Inc. $($share price $=$$$39\mathrm{.}50,$ shares outstanding $=827\mathrm{.}04$ million $).$

The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions

below. Do not round intermediate calculations. Round your answers to two decimal places.

Open spreadsheet

a$.$ If the divisor for the price$-$weighted average is $0\mathrm{.}9845,$ what is the index value?

b$.$ If the beginning value of the value$-$weighted index is $$76,822\mathrm{.}51$ million and the index base value is $100,$ what is the current value of this index?

c$.$ If the price of the three stocks change to Lifestyle $=$$$29,$ Frenzy $=$$$35,$ and Mango $=$$$35,$ what is the value of the two indexes?

New price index value:

New value$-$weighted index:

Why are they different?

The price$-$weighted index

because it is driven by

The value$-$weighted index decreased hat$(v)$ because it is driven by market capitalization