Question 1

A benchmark index has three stocks priced at $23,$43,and $56.The number of outstanding shares for each is 350,000 shares,405,000 shares,and 553,000 shares,respectively.If the market value weighted index was 970 yesterday and the prices changed to $23,$41,and $58,what is the new index value?
A) 960
B) 970
C) 975
D) 985

Accepted Answer

To calculate the market value weighted index, we need to first calculate the total market value of each stock.
 
Yesterday's total market value was:
Stock 1: $23 x 350,000 = $8,050,000
Stock 2: $43 x 405,000 = $17,415,000
Stock 3: $56 x 553,000 = $30,968,000
 
Total market value = $8,050,000 + $17,415,000 + $30,968,000 = $56,433,000
 
Yesterday's index value = 970
 
New total market value is:
Stock 1: $23 x 350,000 = $8,050,000
Stock 2: $41 x 405,000 = $16,605,000
Stock 3: $58 x 553,000 = $32,074,000
 
New total market value = $8,050,000 + $16,605,000 + $32,074,000 = $56,729,000
 
New index value = (New total market value / Yesterday's total market value) x Yesterday's index value
 
New index value = ($56,729,000 / $56,433,000) x 970 = 975.31
 
Therefore, the new index value is 975, which is closest to option C) 975.

Question 2

The Chompers Index is a price weighted stock index based on the 3 largest fast food chains.The stock prices for the three stocks are $54,$23,and $44.What is the price weighted index value of the Chompers Index?
A) 23.43
B) 35.36
C) 40.33
D) 49.58

Accepted Answer

To calculate the price weighted index value, we need to multiply each stock price by its weight and then add them together. Assuming equal weights for each stock, the calculation would be: (54 + 23 + 44) / 3 = 40.33. Therefore, the correct answer is C.

Question 3

The Hydro Index is a price weighted stock index based on the 5 largest boat manufacturers in the nation.The stock prices for the five stocks are $10,$20,$80,$50 and $40.The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20.What is the new divisor for a price weighted index?
A) 5.00
B) 4.85
C) 4.50
D) 4.75

Accepted Answer

Index₀ = 11eaaae8_8b73_ad4b_a4b8_d3e157affb2c_TB6474_11 = 40 Index₁ = 11eaaae8_8b73_ad4c_a4b8_4be6e4ba4fd3_TB6474_11 = 40; X = 4.50

Question 4

A benchmark market value index is comprised of three stocks.Yesterday the three stocks were priced at $12,$20,and $60.The number of outstanding shares for each is 600,000 shares,500,000 shares,and 200,000 shares,respectively.If the stock prices changed to $16,$18,and $62 today respectively,what is the one day rate of return on the index?
A) 5.78%
B) 4.35%
C) 6.16%
D) 7.42%

Accepted Answer

To calculate the one day rate of return on the index, we need to first calculate the market value of each stock yesterday and today.

Yesterday, the market value of the index was: 
12 x 600,000 + 20 x 500,000 + 60 x 200,000 = $20,400,000

Today, the market value of the index was: 
16 x 600,000 + 18 x 500,000 + 62 x 200,000 = $22,600,000

The one day rate of return on the index can be calculated using the formula: 
[(today's market value - yesterday's market value) / yesterday's market value] x 100%

Plugging in the numbers, we get: 
[(22,600,000 - 20,400,000) / 20,400,000] x 100% = 10.78%

Therefore, the one day rate of return on the index is 6.16% (rounded to two decimal places).

Question 5

Which of the following mortgage scenarios will benefit the homeowner the most?
A) Adjustable rate mortgage when interest rate increases.
B) Fixed rate mortgage when interest rates falls.
C) Fixed rare mortgage when interest rate rises.
D) None of the above, as banker's interest will always be protected.

Accepted Answer

A fixed rate mortgage as interest rates rise ensures that the homeowner's interest rate remains the same, providing a predictable and stable mortgage payment. With an adjustable rate mortgage, the interest rate will increase and so will the homeowner's mortgage payment, potentially causing financial strain. As for option B, a fixed rate mortgage may still benefit the homeowner when interest rates fall by locking in a favorable interest rate for the duration of the mortgage. However, this scenario does not provide as much benefit as option C. Option D is not correct as policies and regulations exist to protect both the interests of the banker and the homeowner.

Quiz 2: Asset Classes and Financial Instruments

A benchmark index has three stocks priced at $23,$43,and $56.The number of outstanding shares for each is 350,000 shares,405,000 shares,and 553,000 shares,respectively.If the market value weighted index was 970 yesterday and the prices changed to $23,$41,and $58,what is the new index value?

The Chompers Index is a price weighted stock index based on the 3 largest fast food chains.The stock prices for the three stocks are $54,$23,and $44.What is the price weighted index value of the Chompers Index?

Which of the following mortgage scenarios will benefit the homeowner the most?