problem 1 , problem 2, problem 4 and problem 5..

ate benchmark? Why? PROBLEMS 1. You are given the following information regarding prices for a sample of stocks. PRICE Stock Number of Shares T T +1 A 1,000,000 60 80 10,000,000 20 35 30,000,000 18 25 a. Construct a price-weighted index for these three stocks, and compute the percentage change in the index for the period from T to T + 1. b. Construct a value-weighted index for these three stocks, and compute the percentage change in the index for the period from T to T + 1. c. Briefly discuss the difference in the results for the two indexes. 2. a. Given the data in Problem 1, construct an equal-weighted index by assuming $1,000 is invested in each stock. What is the percentage change in wealth for this portfolio? b. Compute the percentage of price change for each of the stocks in Problem 1. Compute the arithmetic mean of these percentage changes. Discuss how this answer compares to the answer in Part a. c. Compute the geometric mean of the percentage changes in Part b. Discuss how this re- sult compares to the answer in Part b. 3. For the past five trading days, on the basis of figures in The Wall Street Journal, compute the daily percentage price changes for the following stock indexes. a. DJIA b. S&P 500 c. NASDAQ Composite Index d. FT- 100 Share Index e. Nikkei 225 Stock Price Average f. Discuss the difference in results for Parts a and b, a and c, a and d, a and e, and d and e. What do these differences imply regarding diversifying within the United States versus diversifying between countries? The Investment Background PRICE SHARES Company A B C A B C Day 1 12 23 52 500 350 250 Day 2 10 22 55 500 350 250 Day 3 14 46 52 500 175* 250 Day 4 13 47 25 500 175 500b Day 5 12 45 26 500 175 500 "Split at close of day 2. "Split at close of day 3. a. Calculate a Dow Jones Industrial Average for days 1 through 5. b. What effects have the splits had in determining the next day's index? (Hint: think of the relative weighting of each stock.) c. From a copy of The Wall Street Journal, find the divisor that is currently being used in calculating the DJIA. (Normally this value can be found on pages C2 and C3.) 5. Utilizing the price and volume data in Problem 4, a. Calculate a Standard & Poor's Index for days 1 through 5 using a beginning index value of 10. b. Identify what effects the splits had in determining the next day's index. (Hint: think of the relative weighting of each stock.)