Numerical Problems

1.

The chart on the next page shows the prices on two consecutive days for each of the 30

component stocks from the Dow Jones Industrial Average (DJIA). The chart also shows the sum

of the 30 stock prices on each of the days. Use this price information to answer the following

questions.

a). The DJIA closed at a value of 12,240.01 on day t , based on a divisor of 0.1230179. On day t+1

, WalMart (WMT) experienced a 2-for-1 stock split. Use the information provided

to calculate the new divisor that will be used starting on day t+1

b). Using your answer for part (a), calculate the return on the DJIA from day t to day t+1

Dow Jones Industrial Average Component Stocks Stock IBM XOM BA Close 105.14 83.22 81.13 79.28 72.42 71.57 69.42 66.00 61.88 59.50 57.64 55.98 49.60 45.93 45.31 44.74 44.63 43.35 42.63 36.87 36.79 34.06 34.01 31.93 28.69 28.21 27.12 25.81 22.20 20.68 1505.74 102.90 81.94 79.28 78.27 72.71 71.02 68.02 64.82 62.00 59.26 57.11 55.41 24.47 45.38 44.43 48.90 44.44 43.78 42.05 36.09 36.27 33.88 33.81 32.00 27.92 28.53 25.79 26.03 22.31 20.47 1469.29 MO UTX CAT PG UNJ KO HON MCD WMT MRK AIG AXP JPM HPQ VZ GE DIS HD MSFT GM PFE INTC Price Sum