1. Use data from the table below to answer this question:

Day 0 Day 1

Price # shares Price # shares

Stock

A 9 17,000 7 17,000

B 18 23,000 10 23,000

C 87 9,000 135 9,000

D 42 12,000 60 12,000

Note: the columns, #shares, on day 0 and day 1 indicate the total share outstanding for each stock.

Suppose we want to construct indices using all four stocks above, and we choose the divisor on day 0 to be 1.

1. Calculate the index level for price-weighted, value-weighted, and equal-weighted indices at day 0.

2. Calculate the index level for price-weighted, value-weighted, and equal-weighted indices at day 1.

3. Calculate the return of each index by the end of day 1.

4. After the market is close by the end of day 1, company C announces a 2.5-1 stock split, will there be any influence on each index? Explain.