1) a) If you buy 100 shares of IBM stock, to what are you entitled

b) What is the most money you can make on investment over the next year

c) If you pay $180 per share ,what is the most money you can lose over the year

2)

Stock Initial price($) Final price($) Shares( millio Initial value Final value of
n) of outstanding
outstanding stock( Million
stock( Million )
)

ABC 25 30 20 500 600

XYZ 100 90 1 100 90
Total 600 690

From the above table

a) Calculate Value of Index and Percentage change in Index-

1)Price Weighted average

2) Market Value Weighted Index

b) Suppose XYZ were to split two for one. Then calculate

1)Price Weighted average

2) Market Value Weighted Index

C) Suppose the price of XYZ increases to $110 and that of ABC falls to $20.Calculate both
before and after split

1))Price Weighted average

2) Market Value Weighted Index

3)
• Calculate a Dow Jones Industrial Average for Days 1 through 5.

• What effects have the splits had in determining the next day’s index?

• Calculate a Standard & Poor’s Index for Days 1 through 5 using a beginning index value of 10.

• Identify what effects the splits had in determining the next day’s index.

4) Suppose the real interest rate is 3% per year and the expected inflation rate is 8%.What is
the nominal interest rate
5) During the past five years, you owned two stocks that had the following annual rates of
return

Year Stock T Stock B

1 0.19 0.08
2 0.08 0.03
3 -0.12 -0.09
4 -0.03 0.02
5 0.15 0.04

a) Compute the arithmetic mean annual rate of return for each stock. Which stock is most
desirable by this measure
b) Compute the Standard Deviation of the annual rate of return for each stock .By this
measure, which is the preferred stock
c) Compute the coefficient of variation for each stock.By this measure, which is a
preferable stock
d) Compute the geometric mean rate of return for each stock.