Deck 5: Security-Market Indexes

Question 1

The low correlations between the U.S. and Japan confirm the benefit of global diversification.

Answer 1

True

Question 2

The major U.S. stock indexes are highly correlated.

Answer 2

True

Question 3

The Dow Jones Industrial Average is a value weighted average.

Answer 3

False

Question 4

There are no composite series currently available that will measure the performance of all securities (i.e. stocks and bonds) in a given country.

Question 5

To solve comparability problems across countries, global equity indexes with consistent sample selection, weighting and computational procedure have been developed.

Question 6

A two for one stock split causes the divisor in a price-weighted series to decline.

Question 7

The Dow Jones Industrial Average has been criticized for being blue-chip biased.

Question 8

Unlike the Dow Jones Industrial Average, the Nikkei-Dow Jones Average is price weighted.

Question 9

The New York Stock Exchange Index is based on a sample of all of the New York Stock Exchange stocks.

Question 10

The general purpose of a market indicator series is to provide an overall indication of aggregate market changes or movements.

Question 11

A bond market index is easier to create than a stock market index because the universe of bonds is much broader than that of stocks.

Question 12

An equally weighted indicator series is also known as an unweighted indicator series.

Question 13

The NYSE series should have higher rates of return and risk measures than the AMEX and OTC series.

Question 14

A value weighted index automatically adjusts for stock splits.

Question 15

It is easier to construct an indicator series for bonds because of their relatively stable returns pattern.

Question 16

There is a high correlation between the Wilshire 5000 index and the alternative NYSE series (S&P 500 and the NYSE), representing the substantial influence of large NYSE stocks on the Wilshire 5000 index.

Question 17

Bond-market indicator series have been around much longer than stock-market indicator series.

Question 18

An aggregate market index can be used as a benchmark to judge the performance of professional money managers.

Question 19

The correlations among the U.S. investment-grade-bond series were very high because all rates of return for investment-grade bonds over time are impacted by common macroeconomic variables.

Question 20

A price weighted series is disproportionately influenced by larger capitalization companies.

Question 21

A price-weighted index such as the DJIA is a geometric mean of current stock prices.

Question 22

Of the following indices, which includes the most comprehensive list of stocks?

A)New York Exchange Index
B)Standard and Poor's Index
C)American Stock Exchange Index
D)NASDAQ Series Index
E)Wilshire Equity Index

Question 23

An example of a value weighted stock market indicator series is the

A)Dow Jones Industrial Average.
B)Nikkei Dow Jones Average.
C)S & P 500 Index.
D)Value Line Index.
E)Shearson Lehman Hutton Index.

Question 24

The Value Line Composite Average is calculated using the ____ of percentage price changes.

A)arithmetic average
B)harmonic average
C)expected value
D)geometric average
E)logarithmic average

Question 25

Studies of correlations among monthly equity price index returns have found:

A)Low correlations between various U.S. equity indexes
B)High correlations between various U.S. equity indexes
C)High correlations between U.S. and non-U.S. equity indexes
D)Negative correlations between various U.S. equity indexes
E)None of the above

Question 26

In a price weighted average stock market indicator series, the following type of stock has the greatest influence

A)The stock with the highest price
B)The stock with the lowest price
C)The stock with the highest market capitalization
D)The stock with the lowest market capitalization
E)The stock with the highest P/E ratio

Question 27

The Standard & Poor's International Index consists of 3 international, 19 national, and 38 international industry indexes.

Question 28

A properly selected sample for use in constructing a market indicator series will consider the sample's source, size and

A)Breadth.
B)Average beta.
C)Value.
D)Variability.
E)Dividend record.

Question 29

The most common way to test a portfolio manager's performance is to compare the portfolio return to a benchmark.

Question 30

In a value weighted index

A)Exchange rate fluctuations have a large impact.
B)Exchange rate fluctuations have a small impact.
C)Large companies have a disproportionate influence on the index.
D)Small companies have an exaggerated effect on the index.
E)None of the above

Question 31

Which of the following are factors that make it difficult to create and maintain a bond index?

A)The universe of bonds is broader than stocks.
B)The universe of bonds is constantly changing due to new issues, bond maturities, calls, and bond sinking funds.
C)It is difficult to derive value, up-to-date prices.
D)Choices a and c
E)All of the above

Question 32

The Morgan Stanley group index for Europe, Australia, and the Far East (EAFE) is a price weighted index.

Question 33

Which of the following is not a global equity indicator series?

A)Morgan Stanley Capital International Indexes
B)Dow Jones World Stock Index
C)FT/S & P-Actuaries World Indexes
D)Merrill Lynch-Wilshire World Indexes
E)None of the above (that is, each is a global equity indicator series)

Question 34

What effect does a stock substitution or stock split have on a price-weighted series?

A)Index remains the same, divisor will increase/decrease.
B)Divisor remains the same, index will increase/decrease.
C)Index and divisor will both remain the same.
D)Index and divisor will both reflect the changes (immediately).
E)Not enough information is provided.

Question 35

Which of the following is not a U.S. investment-grade bond index?

A)Merrill Lynch
B)Ryan Treasury
C)Salomon Brothers
D)Lehman Brothers
E)None of the above (that is, all are U.S. investment-grade bond indexes)

Question 36

The Standard & Poor's 500 index is an example of a value weighted index.

Question 37

Which of the following is not a value-weighted series?

A)NASDAQ Industrial Index
B)Dow Jones Industrial Average
C)Wilshire 5000 Equity Index
D)American Stock Exchange Series
E)NASDAQ Composite Index

Question 38

Which of the following is true of the various market index series?

A)A low correlation exists between the U.S. indexes and those of Japan.
B)The NYSE series have higher rates of return and risk measures than the AMEX and OTC series.
C)A low correlation exists between alternative series that include almost all NYSE stocks.
D)A low correlation exists between alternative bond series.
E)None of the above

Question 39

The Ryan Treasury Index is an example of a

A)Bond market indicator series.
B)Stock market indicator series.
C)Composite security market series.
D)World market series.
E)Commodity market series.

Question 40

Which of the following is not a use of security market indicator series?

A)To use as a benchmark of individual portfolio performance
B)To develop an index portfolio
C)To determine factors influencing aggregate security price movements
D)To use in the measurement of systematic risk
E)To use in the measurement of diversifiable risk

Question 41

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. What is the divisor at the beginning of January 14th?

A)3.0
B)2.5
C)2.2734
D)1.9375
E)None of the above

Question 42

Exhibit 5.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c } \text { Companies } & \begin{array} { c } \text { Number of shares } \\\text { outstanding }\end{array} & \begin{array} { c } \text { Closing Prices } \\\text { Day T }\end{array} & \begin{array} { c } \text { (per share) } \\\text { Day } \mathbf { T } + \mathbf { 1 }\end{array} \\\hline 1 & 2,000 & \$ 30.00 & \$ 25.00 \\2 & 7,000 & 55.00 & 60.00 \\3 & 5,000 & 20.00 & 25.00 \\4 & 4,000 & 40.00 & 45.00\end{array}$$

-Refer to Exhibit 5.1. Assume that a stock price-weighted indicator consisted of the four issues with their prices. What are the values of the stock indicator for Day T and T + 1 and what is the percentage change?

A)36.25, 38.75, 6.9%
B)38.75, 36.25, -6.9%
C)100, 106.9, 6.9%
D)107.48, 106.33, 1.15%
E)None of the above

Question 43

A style index created to track ethical funds is known as:

A)Green index
B)SRI index
C)EAFE index
D)Freedom index
E)Ethical index

Question 44

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. Calculate a value weighted index for January 16th if the initial index value is 100.

A)123.07
B)100.00
C)102.31
D)111.54
E)None of the above

Question 45

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. Calculate a price weighted average for January 14th.

A)32
B)30
C)36.13
D)34
E)None of the above

Question 46

The following are examples of Style Indexes

A)Small-cap growth
B)Mid-cap value
C)Small-cap value
D)All of the above
E)None of the above

Question 47

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. Calculate a price weighted average for January 13th.

A)32
B)30
C)36.13
D)34
E)None of the above

Question 48

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. What is the divisor at the beginning of January 16th?

A)1.9375
B)3.0
C)2.5
D)2.2734
E)None of the above

Question 49

Which index is created by first deriving the initial total market value of all stocks used in the index?

A)Equally-weighted index.
B)Price-weighted index.
C)Unweighted index.
D)Value-weighted index.
E)All of the above

Question 50

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. Calculate a value weighted index for January 15th if the initial index value is 100.

A)102.31
B)100
C)123.07
D)111.54
E)None of the above

Question 51

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. Calculate a value weighted index for Jan. 14th if the initial index value is 100.

A)100
B)102.31
C)123.07
D)111.54
E)None of the above

Question 52

Studies of correlations among monthly U.S. bond price index returns have found:

A)Low correlations between investment grade bonds and high yield bonds
B)High correlations between investment grade bonds and high yield bonds
C)Low correlations between various investment grade bond indexes
D)Negative correlations between investment grade bonds and high yield bonds
E)None of the above

Question 53

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. Calculate a value weighted index for Jan. 13th if the initial index value is 100.

A)111.54
B)100
C)102.31
D)123.07
E)None of the above

Question 54

The actual index movements are typically based on the arithmetic mean of the percent changes in price or value for the stocks in the

A)Price-weighted index.
B)Unweighted index.
C)Value-weighted index.
D)All of the above
E)None of the above

Question 55

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. Calculate a price weighted average for January 16th.

A)30
B)32
C)34
D)36.13
E)None of the above

Question 56

Exhibit 5.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c } \text { Companies } & \begin{array} { c } \text { Number of shares } \\\text { outstanding }\end{array} & \begin{array} { c } \text { Closing Prices } \\\text { Day T }\end{array} & \begin{array} { c } \text { (per share) } \\\text { Day } \mathbf { T } + \mathbf { 1 }\end{array} \\\hline 1 & 2,000 & \$ 30.00 & \$ 25.00 \\2 & 7,000 & 55.00 & 60.00 \\3 & 5,000 & 20.00 & 25.00 \\4 & 4,000 & 40.00 & 45.00\end{array}$$

-Refer to Exhibit 5.1. For a value-weighted series, assume that Day T is the base period and the base value is 100. What is the new index value for Day T + 1 and what is the percentage change in the index from Day T?

A)106.33, 6.33%
B)107.48, 7.48%
C)109.93, 9.93%
D)108.7, 8.7%
E)None of the above

Question 57

Which of the fundamental factors was not used in the Fundamental Index created by Research Affiliates, Inc.?

A)Sales
B)Profits (cash flow)
C)Leverage (debt/equity)
D)Net assets (book value)
E)Dividends

Question 58

Exhibit 5.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c } \text { Companies } & \begin{array} { c } \text { Number of shares } \\\text { outstanding }\end{array} & \begin{array} { c } \text { Closing Prices } \\\text { Day T }\end{array} & \begin{array} { c } \text { (per share) } \\\text { Day } \mathbf { T } + \mathbf { 1 }\end{array} \\\hline 1 & 2,000 & \$ 30.00 & \$ 25.00 \\2 & 7,000 & 55.00 & 60.00 \\3 & 5,000 & 20.00 & 25.00 \\4 & 4,000 & 40.00 & 45.00\end{array}$$

-Refer to Exhibit 5.1. Compute an unweighted price indicator series, using geometric means. What is the percentage change in the index from Day T to Day T+1? Assume a base index value of 100 on Day T.

A)5.35%
B)7.48%
C)9.93%
D)6.33%
E)None of the above

Question 59

Index movements are influenced by differential prices of the components in a(n)

A)Equally-weighted index.
B)Price-weighted index.
C)Unweighted index.
D)Value-weighted index.
E)All of the above

Question 60

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $\begin{array}{lllrlll}&\text { Stock Price } &&&\text { \# Shares }\\&\mathrm{X} & \mathrm{Y} & \mathrm{Z} & \mathrm{X} & \mathrm{Y} & \mathrm{Z} \\\hline \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \\\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \\\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000 * * & 2000 & 2000 \\\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000\end{array}$ *2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005

-Refer to Exhibit 5.2. Calculate a price weighed average for January 15th.

A)30
B)36.13
C)32
D)34
E)None of the above

Question 61

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the unweighted index for Dec 31, 2003, prior to the splits. Assume a base index value of 100. The base year is Dec 31, 2003.

A)100.0
B)200.0
C)150.0
D)120.0
E)175.0

Question 62

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the percentage return in the price weighted series for the period Dec 31, 2000 to Dec 31, 2004.

A)12.68%
B)20.00%
C)21.76%
D)33.33%
E)40.00%

Question 63

Exhibit 5.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Year } & \text { \% Price Change for G B Industries } \\\hline 2000 & 10.0 \% \\2001 & 12.0 \% \\2002 & 10.0 \% \\2003 & 11.0 \% \\2004 & 6.0 \%\end{array}$$

-Refer to Exhibit 5.3. Calculate the average annual rate of change for GB Industries for the 5 year period using the arithmetic mean.

A)0.098%
B)9.80%
C)8.50%
D)8.00%
E)89.00%

Question 64

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the value weighted index for Dec 31, 2004. Assume a base index value of 100. The base year is Dec 31, 2003.

A)121.25
B)100.0
C)81.69
D)72.5
E)120.0

Question 65

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the percentage return in the value weighted index for the period Dec 31, 2003 to Dec 31, 2004.

A)12.68%
B)20.00%
C)21.76%
D)33.33%
E)40.00%

Question 66

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the price weighted series for Dec 31, 2003, prior to the splits.

A)81.69
B)100.0
C)72.5
D)121.25
E)119.25

Question 67

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the unweighted index (geometric mean) for Dec 31, 2004. Assume a base index value of 100. The base year is Dec 31, 2003.

A)119.25
B)121.25
C)151.25
D)95.25
E)100.25

Question 68

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c } & & { \text { Price } } \\\text { Stock } & \text { Number of Shares } & \text { Day T } & \text { Day T + 1 } \\\hline \text { Q } & 5,000,000 & 80 & 95 \\R & 8,000,000 & 60 & 55 \\\text { S } & 15,000,000 & 20 & 24\end{array}$$

-Refer to Exhibit 5.6. Compute the arithmetic mean of the price change of Stocks Q, R, and S from days T to T + 1.

A)8.65%
B)10.14%
C)15.69%
D)30.42%
E)47.08%

Question 69

Exhibit 5.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Year } & \text { \% Price Change for Stock Index } \\\hline 2000 & 8.0 \% \\2001 & 10.0 \% \\2002 & - 14.0 \% \\2003 & 20.0 \% \\2004 & - 10.0 \%\end{array}$$

-Refer to Exhibit 5.4. Calculate the average annual rate of change for this index for the 5 year period using the geometric mean.

A)0.09%
B)1.99%
C)3.99%
D)4.50%
E)4.67%

Question 70

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the price weighted series for Dec 31, 2003, after the splits.

A)72.5
B)100.0
C)119.25
D)121.25
E)81.69

Question 71

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c } & & { \text { Price } } \\\text { Stock } & \text { Number of Shares } & \text { Day T } & \text { Day T + 1 } \\\hline \text { Q } & 5,000,000 & 80 & 95 \\R & 8,000,000 & 60 & 55 \\\text { S } & 15,000,000 & 20 & 24\end{array}$$

-Refer to Exhibit 5.6. Calculate a price weighted average for Day T.

A)46.20
B)53.33
C)54.12
D)92.39
E)108.23

Question 72

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the value weighted index for Dec 31, 2003, after the splits. Assume a base index value of 100. The base year is Dec 31, 2003.

A)72.5
B)81.69
C)100.0
D)120.0
E)121.25

Question 73

Exhibit 5.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Year } & \text { \% Price Change for G B Industries } \\\hline 2000 & 10.0 \% \\2001 & 12.0 \% \\2002 & 10.0 \% \\2003 & 11.0 \% \\2004 & 6.0 \%\end{array}$$

-Refer to Exhibit 5.3. Calculate the average annual rate of change for GB Industries for the 5 year period using the geometric mean.

A)9.7800%
B)0.0978%
C)9.0700%
D)0.0970%
E)3.6400%

Question 74

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the value weighted index for Dec 31, 2003, prior to the splits. Assume a base index value of 100. The base year is Dec 31, 2003.

A)120.0
B)81.69
C)72.5
D)100.0
E)121.25

Question 75

Exhibit 5.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c } \text { Year } & \text { \% Price Change for Stock Index } \\\hline 2000 & 8.0 \% \\2001 & 10.0 \% \\2002 & - 14.0 \% \\2003 & 20.0 \% \\2004 & - 10.0 \%\end{array}$$

-Refer to Exhibit 5.4. Calculate the average annual rate of change for this index for the 5 year period using the arithmetic mean.

A)0.28%
B)1.28%
C)2.80%
D)3.58%
E)6.38%

Question 76

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the price weighted series for Dec 31, 2004.

A)121.25
B)119.25
C)100.0
D)72.5
E)81.69

Question 77

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the unweighted index for Dec 31, 2003, after the splits. Assume a base index value of 100. The base year is Dec 31, 2003.

A)110.0
B)200.0
C)100.0
D)120.0
E)150.0

Question 78

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c c } \text { Stock } & \begin{array} { c } \text { 31-Dec-03 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-03 } \\\text { Shares }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Price }\end{array} & \begin{array} { c } \text { 31-Dec-04 } \\\text { Shares }\end{array} \\\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \\\text { X } & \$ 150.00 & 5000 & \$ 65.00 & 10000 \\\text { Y } & \$ 25.00 & 20000 & \$ 35.00 & 20000 \\Z & \$ 40.00 & 25000 & \$ 50.00 & 25000\end{array}$$ Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.

-Refer to Exhibit 5.5. Calculate the percentage return in the unweighted index (geometric mean) for the period Dec 31, 2003 to Dec 31, 2004. Assume a base index value of 100. Base year is Dec 31, 2003.

A)19.25%
B)21.25%
C)51.25%
D)5.25%
E)100.25%

Question 79

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c } & & { \text { Price } } \\\text { Stock } & \text { Number of Shares } & \text { Day T } & \text { Day T + 1 } \\\hline \text { Q } & 5,000,000 & 80 & 95 \\R & 8,000,000 & 60 & 55 \\\text { S } & 15,000,000 & 20 & 24\end{array}$$

-Refer to Exhibit 5.6. Calculate a value weighted average for Day T + 1. Assume a base index value of 100 on Day T.

A)46.20
B)53.33
C)54.12
D)92.39
E)108.23

Question 80

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) $$\begin{array} { c c c c } & & { \text { Price } } \\\text { Stock } & \text { Number of Shares } & \text { Day T } & \text { Day T + 1 } \\\hline \text { Q } & 5,000,000 & 80 & 95 \\R & 8,000,000 & 60 & 55 \\\text { S } & 15,000,000 & 20 & 24\end{array}$$

-Refer to Exhibit 5.6. If an equal-weighted index is constructed on Day T with $10,000 in each stock, what is the percentage change in wealth for this index on Day T + 1? Assume a base index value of 100 on Day T.

A)8.65%
B)10.14%
C)15.69%
D)30.42%
E)47.08%