The market consists of the following stocks. Their prices and number of shares are as follows:
Stock Price Number of Shares Outstanding
A $10 100,000
B 20 10,000
C 30 200,000
D 40 50,000
a) The price of Stock C doubles to $60, what is the percentage increase in the market if a S&P 500 type of measure of the market is used?
b) Repeat question (a) but use a Value Line type of measure of the market (i.e, a geometric average) to determine the percentage increase.
c) Supposed the price of Stock B doubled instead of Stock C. How would the market have fared using the aggregate measures employed in (a) and (b)? Why are your answers different?
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