The market consists of the following stocks. Their prices and number of shares are as follows:
a. The price of Stock C doubles to $60. What is the percentage increase in the market if a S&P 500 type of measure of the market (value-weighted average) is used?
b. Repeat question (a) but use a Value Line type of measure of the market (i.e., a geometric average) to determine the percentage increase.
c. Suppose the price of stock B doubled instead of stock C. How would the market have fared using the aggregate measures employed in (a) and (b)? Why are your answers different?

Question

The market consists of the following stocks. Their prices and number of shares are as follows:  
a. The price of Stock C doubles to $60. What is the percentage increase in the market if a S&P 500 type of measure of the market (value-weighted average) is used?
b. Repeat question (a) but use a Value Line type of measure of the market (i.e., a geometric average) to determine the percentage increase.
c. Suppose the price of stock B doubled instead of stock C. How would the market have fared using the aggregate measures employed in (a) and (b)? Why are your answers different?

Quizplus · Accepted Answer

The Answer of The market consists of the following stocks. Their prices and number of shares are as follows:  
a. The price of Stock C doubles to $60. What is the percentage increase in the market if a S&P 500 type of measure of the market (value-weighted average) is used?
b. Repeat question (a) but use a Value Line type of measure of the market (i.e., a geometric average) to determine the percentage increase.
c. Suppose the price of stock B doubled instead of stock C. How would the market have fared using the aggregate measures employed in (a) and (b)? Why are your answers different?

The Market Consists of the Following Stocks