Question 3

The following table gives the prices and # of shares outstanding for 4 stocks in a representative stock market. Assume that the prices are as of May 10, 2018 Table 1: Stock prices on May 10, 2018 Company Price # of shares Market Value (In $1.000) $150 S34 $42 $15 20,000 150,000 800,000 450,000 $3,000 $5,100 $33,600 6,750 48,450 Total Market Value as of May 10 1. Compile a price weighted average for May 10, 2018 similar.to the Dow Jones Industrial Average using the above four companies (use a divisor of 2.7). For convenience we will call the average the DJIA Suppose that by July 11, 2018 the price of company A increases by 10% but the price of allof the other companies remain the same. On July 11 the prices of the companies in the market are as given in Table 2 Table 2: Stock prices on July 11, 2018 Company Price # of shares Market Value In $1,000) $165 $34 S42 S15 20,000 150,000 800,000 450,000 $3,300 $5,100 $33,600 6,750 48,750 Total Market Value as of July 11 a. What is the DJIA on July 11 (again divisor is 2.7)? b, what is the % change in the DJIA from May 10 to July 1 1? c, what is the % change in the total market value of the four companies? 3. Using the information in Table 1, assume that company A splits 2 for I If there is no adjustment made to the divisor, what is the DJIA after the split? Suggest a new divisor for use after the stock split so that there is no jump in the DJIA. a. b