Value-Weighted Index

Example 1:

Price Shares ($Mil) Mkt Cap ($Mil)

GM 40.56 560.72 22,743

Nordstrom 25.91 136.07 3,526

Home Depot 32.90 2370.00 77,973

Total MV(1): 104,241

Day 1 Index Level = 104,241 / 104,241 x 1,000

= ( )

Price Shares ($Mil) Mkt Cap ($Mil)

GM 44.21 560.72 ( )

Nordstrom 27.25 136.07 ( )

Home Depot 33.50 2370.00 ( )

Total MV(2): ( )

Day 2 Index Level = ( ) / ( ) x 1,000

= 1,035.02

Price Shares ($Mil) Mkt Cap ($Mil)

GM 43.25 560.72 24,251.1

Nordstrom 23.21 136.07 3,158.2

Home Depot 34.10 2370.00 80,817.0

Total MV(3): ( )

Day3 Index Level = ( ) / ( ) x 1,000

= 1,038.23

Example 2:

You want to create a price-weighted index of the following three stocks. If you set the beginning index equal to 100, what will the ending index value be? Also, find the percentage increase/decrease over the period.

Shares Beginning Market

Stock Outstanding Share Price Cap.

Alpha 2,000 $22 $ __________

Beta 5,000 $36 $ __________

Gamma 3,000 $17 $__________

Shares Ending Market

Stock Outstanding Share Price Cap.

Alpha 2,000 $23 $___________

Beta 5,000 $35 $ ___________

Gamma 3,000 $19 $____________