Assume the Following Five Companies Are Used in Computing an Index

Essay

Assume the following five companies are used in computing an index (there have been no stock splits during this time). $\begin{array}{lrrr}&&\text { Base Period }&\text { Current Period }\\&\text { Shares} &\text { January 1, 1977 }&\text { December 31, 2004}\\\underline{\text {Company}}&\underline{\text { Outstanding }} & \underline{\text { Market Price }} & \underline{\text { Market Price }}\\\text { A } & 2,000 & \$ 2.00 & \$ 14.00 \\\text { B } & 6,000 & 6.00 & 18.00 \\\text { C } & 5,000 & 9.00 & 23.00 \\\text { D } & 8,000 & 10.00 & 5.00 \\\text { E } & 1,000 & 13.00 & 40.00\end{array}$ (a) If the index is price-weighted, what will be the value of the index on Dec. 31, 2004?
(b) Using the same data from the above table, determine the index value if the index is calculated on a value-weighted basis.