On October 28 2015 the DJIA opened at 1771611 The divisor at

On October 28, 2015, the DJIA opened at 17,716.11. The divisor at that time was 0.149677385. In October 2015, Goldman Sachs was the highest priced stock in the DJIA and Cisco was the lowest. The closing price for Goldman Sachs on October 27, 2015, was $181.99, and the closing price for Cisco was $28.09. Calculate the difference between the new DJIA levels under the following two scenarios (i.e.g, Scenario 1 - Scenario 2). Scenario 1: Suppose the next day the other 29 stock prices remained unchanged and Goldman Sachs increased 5 percent. Scenario 2: Suppose the next day the other 29 stock prices remained unchanged and Cisco Sachs increased 5 percent. (Round your answer to 2 decimal places.)

Solution

DJIA on 28th October 2015 = 17,716.11

Divisor at that time = 0.149677385

Let us remove the effect of the divisor,

=17,716.11?*0.149677385?= 2651.70102

Rounding off to 2 decimals = 2651.70 ………. (1)

?Scenario 1:

Goldman Sachs on October 27, 2015 = $181.99

= $181.99 * 5% = 9.9095 ………..(2)

= 2651.70 + 9.9095

= 2661.6095 Which is 2661.61 (Approx) ……… (3)

= 2661.61/0.149677385

= 17782.31 ……….(4)

Scenario 2:

If Cisco Increased 5% on next day:

Cisco on October 27, 2015 = $28.09

= $28.09 * 5% = 1.445 ………..(5)

= 2651.70 + 1.445

= 2653.145 Which is 2653.15 (Approx) ……… (6)

= 2653.15/0.149677385

= 17725.79 ……….(7)

Difference between the New DJIA levels under both the Scenarios (4)-(7) =

= 17782.31 - 17725.79

= 56.52 points

?