$10$:$07$

FNCE$\_$ECON$300$v$3\_$Assign$2.$do$...$

b$.$ Prepare a mini$-$Dow price index from a subset of the DJIA stocks using the following instructions:

Get stock price data $($e$.$g$.,$ the daily closing price$)$ from a site like

finance.yahoo.com for $10$ stocks in the DJIA. Record the prices for the prior $10$ trading days, and use these prices to compute a price$-$weighted index for each of these $10$ days by adding up the prices of your $10$ stocks each day.

$(10$ marks$)$

Also record the closing value of the DJIA for the same $10$ days.

Chart and compare the performance of your mini$-$Dow index versus the DJIA over these $10$ trading days $($use a table, a graph, or another appropriate method$),$ using the values you calculated above. Note that the scale for the two indexes will have to be adjusted to record the actual values on a graph, but a daily return graph $($stated in percentages$),$ would already be on the same scale. $(5$ marks$)$

Comment on the differences in performance over this time. How closely do they follow one another? Are the daily returns similar? Are the returns similar overall? $(5$ marks$)$

$8\mathrm{.}2(20$ marks$)$

The four stocks below will be used to answer the questions that follow. You are advised to review Lesson $8$: Securities and Markets, Note $3$: Stock Splitting.

$\backslash$table$[[$Name of company # of shares Price,a time t Price @ time t$+1,,],[$Michelangelo$,200,10,13],[$Leonardo$,1,15,10],[$Raphael$,100,20,22],[$Donatello$,50,25,23]]$

a$.$ Compute a price$-$weighted index by adding the stocks' prices at time $t$ and time $t+1.$ What is the percentage change in the index? $(6$ marks$)$

b$.$ Compute a value$-$weighted index by adding the market values of the stocks at time $t$ and time $t+1$ What is the percentage change in the index? $(12$ marks$)$

c$.$ Why is there a difference between your answers to parts a and $b?$

$(2$ marks$)$

References