The Market Consists of the Following Stocks

Essay

The market consists of the following stocks. Their prices and number of shares are as follows:
    Stock         Price   Number of Shares Outstanding
      A            $10              100,000
      B             20               10,000
      C             30              200,000
      D             40               50,000

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?