Chapter 04 – Security Market Indexes and Index Funds
52. Refer to Exhibit 4.2. Calculate a price weighed average for January 15th.
a.
30
b.
36.13
c.
32
d.
34
e.
37
53. Refer to Exhibit 4.2. What is the divisor at the beginning of January 16th?
a.
1.9375
b.
3.0
c.
2.5
d.
2.2734
e.
3.2852
54. Refer to Exhibit 4.2. Calculate a price weighted average for January 16th.
a.
30
b.
32
Chapter 04 – Security Market Indexes and Index Funds
c.
34
d.
36.13
e.
No37
55. Refer to Exhibit 4.2. Calculate a value weighted index for Jan. 13th if the initial index value is 100.
a.
111.54
b.
100
c.
102.31
d.
123.07
e.
143.25
56. Refer to Exhibit 4.2. Calculate a value weighted index for Jan. 14th if the initial index value is 100.
a.
100
b.
102.31
c.
123.07
d.
111.54
e.
121.32
57. Refer to Exhibit 4.2. Calculate a value weighted index for January 15th if the initial index value is 100.
a.
102.31
b.
100
c.
123.07
d.
111.54
e.
121.32
58. Refer to Exhibit 4.2. Calculate a value weighted index for January 16th if the initial index value is 100.
a.
123.07
b.
100.00
c.
102.31
d.
111.54
e.
121.32
Exhibit 4.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
% Price Change for GB Industries
10.0%
12.0%
10.0%
11.0%
6.0%
59. Refer to Exhibit 4.3. Calculate the average annual rate of change for GB Industries for the five-year period using the
arithmetic mean.
a.
0.098%
b.
9.80%
c.
8.50%
d.
8.00%
e.
89.00%
60. Refer to Exhibit 4.3. Calculate the average annual rate of change for GB Industries for the five-year period using the
geometric mean.
a.
9.7800%
b.
0.0978%
c.
9.0700%
d.
0.0970%
e.
3.6400%
Exhibit 4.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Year
% Price Change for Stock Index
2000
8.0%
2001
10.0%
2002
−14.0%
2003
20.0%
2004
−10.0%
61. Refer to Exhibit 4.4. Calculate the average annual rate of change for this index for the five-year period using the
arithmetic mean.
a.
0.28%
b.
1.28%
c.
2.80%
d.
3.58%
e.
6.38%
62. Refer to Exhibit 4.4. Calculate the average annual rate of change for this index for the five-year period using the
geometric mean.
a.
0.09%
b.
1.99%
c.
3.99%
d.
4.50%
e.
4.67%
Exhibit 4.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
31–Dec–03
31–Dec–03
31–Dec–04
31–Dec–04
Stock
Price
Shares
Price
Shares
W
$ 75.00
10000
$50.00
20000
Chapter 04 – Security Market Indexes and Index Funds
X
$150.00
5000
$65.00
10000
Y
$ 25.00
20000
$35.00
20000
Z
$ 40.00
25000
$50.00
25000
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
63. Refer to Exhibit 4.5. Calculate the price weighted series for Dec 31, 2003, prior to the splits.
a.
81.69
b.
100.0
c.
72.5
d.
121.25
e.
119.25
64. Refer to Exhibit 4.5. Calculate the price weighted series for Dec 31, 2003, after the splits.
a.
72.5
b.
100.0
c.
119.25
d.
121.25
e.
81.69
65. Refer to Exhibit 4.5. Calculate the price weighted series for Dec 31, 2004.
a.
121.25
b.
119.25
c.
100.0
Chapter 04 – Security Market Indexes and Index Funds
d.
72.5
e.
81.69
66. Refer to Exhibit 4.5. Calculate the percentage return in the price weighted series for the period Dec 31, 2000 to Dec
31, 2004.
a.
12.68 percent
b.
20.00 percent
c.
21.76 percent
d.
33.33 percent
e.
40.00 percent
67. Refer to Exhibit 4.5. Calculate the value weighted index for Dec 31, 2003, prior to the splits. Assume a base index
value of 100. The base year is Dec 31, 2003.
a.
120.0
b.
81.69
c.
72.5
d.
100.0
e.
121.25
68. Refer to Exhibit 4.5. Calculate the value weighted index for Dec 31, 2003, after the splits. Assume a base index value
of 100. The base year is Dec 31, 2003.
a.
72.5
b.
81.69
c.
100.0
d.
120.0
e.
121.25
69. Refer to Exhibit 4.5. Calculate the value weighted index for Dec 31, 2004. Assume a base index value of 100. The
base year is Dec 31, 2003.
a.
121.25
b.
100.0
c.
81.69
d.
72.5
e.
120.0
70. Refer to Exhibit 4.5. Calculate the percentage return in the value weighted index for the period Dec 31, 2003 to Dec
31, 2004.
a.
12.68 percent
b.
20.00 percent
c.
21.76 percent
Chapter 04 – Security Market Indexes and Index Funds
d.
33.33 percent
e.
40.00 percent
71. Refer to Exhibit 4.5. Calculate the unweighted index for Dec 31, 2003, prior to the splits. Assume a base index value
of 100. The base year is Dec 31, 2003.
a.
100.0
b.
200.0
c.
150.0
d.
120.0
e.
175.0
72. Refer to Exhibit 4.5. Calculate the unweighted index for Dec 31, 2003, after the splits. Assume a base index value of
100. The base year is Dec 31, 2003.
a.
110.0
b.
200.0
c.
100.0
d.
120.0
e.
150.0
73. Refer to Exhibit 4.5. Calculate the unweighted index (geometric mean) for Dec 31, 2004. Assume a base index value
of 100. The base year is Dec 31, 2003.
a.
119.25
b.
121.25
c.
151.25
d.
95.25
e.
100.25
74. Refer to Exhibit 4.5. Calculate the percentage return in the unweighted index (geometric mean) for the period Dec 31,
2003 to Dec 31, 2004. Assume a base index value of 100. The base year is Dec 31, 2003.
a.
19.25 percent
b.
21.25 percent
c.
51.25 percent
d.
5.25 percent
e.
100.25 percent
Exhibit 4.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Price
Stock
Number of Shares
Day T
Day T + 1
Q
5,000,000
80
95
75. Refer to Exhibit 4.6. Calculate a price weighted average for Day T.
a.
46.20
b.
53.33
c.
54.12
d.
92.39
e.
108.23
76. Refer to Exhibit 4.6. Calculate a value weighted average for Day T + 1. Assume a base index value of 100 on Day T.
a.
46.20
b.
53.33
c.
54.12
d.
92.39
e.
108.23
77. Refer to Exhibit 4.6. If an equal-weighted index is constructed on Day T with $10,000 in each stock, what is the
percentage change in wealth for this index on Day T + 1? Assume a base index value of 100 on Day T.
a.
8.65 percent
b.
10.14 percent
c.
15.69 percent
d.
30.42 percent
e.
47.08 percent
Chapter 04 – Security Market Indexes and Index Funds
78. Refer to Exhibit 4.6. Compute the arithmetic mean of the price change of Stocks Q, R, and S from days T to T + 1.
a.
8.65 percent
b.
10.14 percent
c.
15.69 percent
d.
30.42 percent
e.
47.08 percent
79. Refer to Exhibit 4.6. Compute the geometric mean of the price change of Stocks Q, R, and S from days T to T + 1.
a.
9.32 percent
b.
10.14 percent
c.
15.57 percent
d.
30.63 percent
e.
54.37 percent
Chapter 04 – Security Market Indexes and Index Funds
Exhibit 4.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Number
December 31, 2011
December 31, 2012
Stock
of Shares
Price
Value
Price
Value
A
5,000
$20
$100,000
$25
$125,000
B
8,000
$40
$320,000
$42
$304,000
C
15,000
$10
$150,000
$15
$225,000
80. Refer to Exhibit 4.7. What would be the total percentage change in an equally weighted portfolio of ABC?
a.
13.33 percent
b.
18.67 percent
c.
23.41 percent
d.
26.67 percent
e.
36.83 percent
81. Refer to Exhibit 4.7. If the December 31, 2011 equal weighted index for ABC was 100, what is the equal weighted
index for ABC on December 31, 2012?
a.
108.35
b.
114.74
c.
120.19
d.
126.67
e.
131.54
82. Refer to Exhibit 4.7. If the December 31, 2011 value weighted index for ABC was 100, what is the value weighted
Chapter 04 – Security Market Indexes and Index Funds
index for ABC on December 31, 2012?
a.
108.35
b.
114.74
c.
120.19
d.
126.67
e.
131.54
83. The Ryan Treasury Index is an example of a
a.
bond market indicator series.
b.
stock market indicator series.
c.
composite security market series.
d.
world market series.
e.
commodity market series.
84. Which of the following are factors that make it difficult to create and maintain a bond index?
a.
The universe of bonds is broader than stocks.
b.
The universe of bonds is constantly changing due to new issues, bond maturities, calls, and bond sinking
funds.
c.
It is difficult to derive valuable, up–to-date prices.
d.
Bond price volatility is affected by duration, which is constantly changing.
e.
All of these are correct.
85. Which of the following is TRUE of the various market index series?
a.
A low correlation exists between the U.S. indexes and those of Japan.
b.
The NYSE series have higher rates of return and risk measures than the AMEX and OTC series.
c.
A low correlation exists between alternative series that include almost all NYSE stocks.
d.
A low correlation exists between alternative bond series.
e.
None of these are correct.
86. Studies of correlations among monthly equity price index returns have found
a.
low correlations between various U.S. equity indexes.
b.
high correlations between various U.S. equity indexes.
c.
high correlations between U.S. and non-U.S. equity indexes.
d.
negative correlations between various U.S. equity indexes.
e.
high correlations between equity and bond indexes.
87. Studies of correlations among monthly U.S. bond price index returns have found
a.
low correlations between investment grade bonds and high yield bonds.
b.
high correlations between investment grade bonds and high yield bonds.
Chapter 04 – Security Market Indexes and Index Funds
c.
low correlations between various investment grade bond indexes.
d.
negative correlations between investment grade bonds and high yield bonds.
e.
None of these are correct.
88. For an indexed portfolio, the fund manager will typically
a.
attempt to replicate the composition of the particular index exactly.
b.
not replicate the composition of the particular index.
c.
not alter the weights when the index composition is changed.
d.
generate high trading expense ratios.
e.
generate high management expense ratios.
89. Exchange traded funds
a.
are exactly the same as index mutual funds.
b.
can be bought and sold like common stocks.
c.
cannot be sold short.
d.
have a high management fee.
e.
cannot be timed for capital gain tax realizations.