Question 1

An index has a market value of $689,400 at the beginning of the period and $722,009 at the end of the period. If you want the beginning index value to be 100, what is the ending index value?

Accepted Answer

Beginning value-weighted index = (689,400/689,400) × 100 = 100Ending value-weighted index = (722,009/689,400) × 100 = 104.73

Question 2

Juno Markets is offering 900 shares in a Dutch auction IPO. The following bids have been received:  How much will Bidder B have to spend to purchase all of the shares that have been allocated to him?

Accepted Answer

The answer of Juno Markets is offering 900 shares in...

Question 3

An index consists of the following securities and has an index divisor of 3.0. What is the price- weighted index return?

Accepted Answer

We cannot calculate the price-weighted index return without the prices of the securities. The index divisor is used to adjust for corporate actions such as stock splits and dividends, so it is not relevant in this calculation. Without the prices, we cannot accurately determine the index return.

Question 4

Mason Materials is offering 800 shares in a Dutch auction IPO. The following bids have been received:  How many shares will be allocated to Bidder A?

Accepted Answer

In a Dutch auction IPO, shares are allocated starting with the highest bidder and working down until all shares are allocated or until the lowest bid is reached.

The highest bid in this case is $20 per share (represented by the bid code TB4324_00_TB4324_00_TB4324_00), which was submitted by Bidder A. There are a total of 800 shares available.

Starting with the highest bid and working down, we allocate shares to each bidder until we reach the lowest bid that can be satisfied. Bidder A's bid of $20 per share can be satisfied up to 145 shares, so that is how many shares they will receive.

Therefore, the answer is D) 145.

Question 5

A price-weighted index consists of stocks A, B, and C which are priced at $55, $38, and $17 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if stock A undergoes a 5-for-1 stock split?

Accepted Answer

After the 5-for-1 split, stock A will have 5 times the number of shares, but its price per share will be divided by 5. Thus, the new price of stock A will be $11 ($55 divided by 5). To maintain the continuity of the index level after the split, the new index divisor will be adjusted by dividing the old index level by the new index level. The old index level is the sum of the prices of the three stocks, which is $55 + $38 + $17 = $110. The new index level is the sum of the new prices of the three stocks, which is $11 + $38 + $17 = $66. Therefore, the new index divisor will be:

New Divisor = Old Index Level/New Index Level 
= $110/$66 
= 1.66667

Rounding to two decimal places, we get a new index divisor of 1.67, which is closest to choice D (1.65).

Question 6

An index consists of the following securities and has an index divisor of 3.0. What is the price- weighted index return?

Accepted Answer

The answer of An index consists of the following securities...

Question 7

A price-weighted index consists of stocks A, B, and C which are priced at $27, $11, and $18 a share, respectively. The current index divisor is 2.24. If stock B undergoes a 1-for-3 reverse stock split, the new index divisor will be:

Accepted Answer

[27 + (11 × 3) + 18]/x = [(27 + 11 + 18)/2.24]; x = 3.12

Question 8

You have the following information:  You want the beginning price-weighted index of these two stocks to be 500. Given this, what is the ending index value?

Accepted Answer

The answer of You have the following information:  You...

Question 9

An index consists of the following securities. What is the value-weighted index return?

Accepted Answer

The answer of An index consists of the following securities....

Question 10

Assume the DJIA closed at 12,487 last night. The divisor is 0.123017848. Assume that 29 of the stocks in the index were unchanged today. One stock increased in value from $54.80 a share yesterday to $57.90 a share today. What is the DJIA index value at the close of trading today?

Accepted Answer

First, we need to calculate the total change in the stock that increased in value: $57.90 - $54.80 = $3.10 
Next, we need to adjust the change for the stock split factor: $3.10 / 0.123017848 = 25.195 
Then, we add this to the previous day's DJIA value: 12,487 + 25.195 = 12,512 
Therefore, the answer is D.

Question 11

You have the following information:  You want the beginning price-weighted index of these two stocks to be 100. Given this, what is the ending index value?

Accepted Answer

The answer of You have the following information:  You...

Question 12

ML Underwriters paid an issuer $37,748,700 as IPO proceeds. The IPO offered 1.86 million shares of which 1.835 million were sold at an offer price of $22 a share. The underwriting spread was 7.75 percent. What type of underwriting was this?

Accepted Answer

This was a firm commitment underwriting because ML Underwriters paid the issuer a fixed amount of $37,748,700 for the sale of the shares and assumed the risk of any unsold shares. The underwriting spread of 7.75 percent was their compensation for assuming this risk.

Question 13

A best efforts IPO underwriting consisted of 2.2 million shares at an offer price of $17 a share. The underwriter's fee was set at 6.65 percent. How many shares were sold if the issuer received $31,926,260.10?

Accepted Answer

Number of shares = [$31,926,260.10/(1 - .0665)]/$17 = 2,011,800 shares

Question 14

A price-weighted index consists of stocks A, B, and C which are priced at $38, $21, and $26 a share, respectively. The current index divisor is 2.7. What will the new index divisor be if stock B undergoes a 3-for-1 stock split?

Accepted Answer

[38 + (21 / 3) + 26] / x = (38 + 21 + 26) / 2.7; x = 2.2553

Question 15

DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been received:  What will the gross proceeds be for this offering?

Accepted Answer

The answer of DT Metals is offering 700 shares in...

Question 16

An index consists of the following securities. What is the value-weighted index return?

Accepted Answer

The answer of An index consists of the following securities....

Question 17

An index consists of the following securities and has an index divisor of 3.0. What is the price- weighted index return?

Accepted Answer

The answer of An index consists of the following securities...

Question 18

An index consists of the following securities. What is the value-weighted index return?

Accepted Answer

The answer of An index consists of the following securities....

Question 19

An index consists of the following securities and has an index divisor of 2.0. What is the price- weighted index return?

Accepted Answer

The answer of An index consists of the following securities...

Question 20

Cee The Moon is offering 700 shares in a Dutch auction IPO. The following bids have been received:  How much will Cee The Moon receive from this offering if the underwriter's fee is 7 percent?

Accepted Answer

The answer of Cee The Moon is offering 700 shares...

Quiz 5: The Stock Market

An index has a market value of $689,400 at the beginning of the period and $722,009 at the end of the period. If you want the beginning index value to be 100, what is the ending index value?

Juno Markets is offering 900 shares in a Dutch auction IPO. The following bids have been received: How much will Bidder B have to spend to purchase all of the shares that have been allocated to him?

An index consists of the following securities and has an index divisor of 3.0. What is the price- weighted index return?

Mason Materials is offering 800 shares in a Dutch auction IPO. The following bids have been received: How many shares will be allocated to Bidder A?

A price-weighted index consists of stocks A, B, and C which are priced at $55, $38, and $17 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if stock A undergoes a 5-for-1 stock split?

An index consists of the following securities and has an index divisor of 3.0. What is the price- weighted index return?

A price-weighted index consists of stocks A, B, and C which are priced at $27, $11, and $18 a share, respectively. The current index divisor is 2.24. If stock B undergoes a 1-for-3 reverse stock split, the new index divisor will be:

You have the following information: You want the beginning price-weighted index of these two stocks to be 500. Given this, what is the ending index value?

An index consists of the following securities. What is the value-weighted index return?

Assume the DJIA closed at 12,487 last night. The divisor is 0.123017848. Assume that 29 of the stocks in the index were unchanged today. One stock increased in value from $54.80 a share yesterday to $57.90 a share today. What is the DJIA index value at the close of trading today?

You have the following information: You want the beginning price-weighted index of these two stocks to be 100. Given this, what is the ending index value?

ML Underwriters paid an issuer $37,748,700 as IPO proceeds. The IPO offered 1.86 million shares of which 1.835 million were sold at an offer price of $22 a share. The underwriting spread was 7.75 percent. What type of underwriting was this?

A best efforts IPO underwriting consisted of 2.2 million shares at an offer price of $17 a share. The underwriter's fee was set at 6.65 percent. How many shares were sold if the issuer received $31,926,260.10?

A price-weighted index consists of stocks A, B, and C which are priced at $38, $21, and $26 a share, respectively. The current index divisor is 2.7. What will the new index divisor be if stock B undergoes a 3-for-1 stock split?

DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been received: What will the gross proceeds be for this offering?

An index consists of the following securities. What is the value-weighted index return?

An index consists of the following securities and has an index divisor of 3.0. What is the price- weighted index return?

An index consists of the following securities. What is the value-weighted index return?

An index consists of the following securities and has an index divisor of 2.0. What is the price- weighted index return?

Cee The Moon is offering 700 shares in a Dutch auction IPO. The following bids have been received: How much will Cee The Moon receive from this offering if the underwriter's fee is 7 percent?