CHAPTER 5: Security-Market Indexes

IDENTIFICATION (1 point each)

Directions: Read each item carefully. Write your answer

1. It is computed by totaling the current prices of the 30 stocks and dividing the sum by a divisor that has
been adjusted to take account of stock splits and changes in the sample over time.

2. A benchmarks used to track the performance of fixed-income.

3. It measures the performance of all securities in a given country.

4. It is an arithmetic mean of prices for 225 stocks on the First Section of the Tokyo Stock Exchange (TSE)
and shows stock price trends since the reopening of the TSE.

5. This indexes are market value weighted and have a base date of December 31, 1986 = 100

6. The most recent ___________________ are those created to track ethical funds referred to as socially
responsible investment (SRI) funds.

II. Modified True or False (1 point each )

Directions: Write TRUE if the statement is correct. If FALSE, underline the word /phrase that makes it
incorrect and write the correct answer on the space provided before each number.

1. A market fundamental weight index called Merrill Lynch-Wilshire Capital Markets Index measures the
total return performance of the combined U.S. taxable fixed-income and equity markets.

2. A value-weighted index is generated by deriving the initial total market value of all stocks used in the
index while in an unweighted index, all stocks carry equal weight regardless of their price or market
value.

3. Technicians are the another group interested in an aggregate market index who believe that the past
price changes can be used to predict future price movements.

4. U.S. Investment-Grade Bond Indexes reflect the performance of government bonds from around the
world.

5. The indexes which composed of more than 2,200 companies worldwide and organized into 120
industry groups is called Dow Jones Wilshire Global Indexes

6. A large biased sample is no better than a small biased sample.

ENUMERATION: ( 3 points )

Enumerate 3 factor in constructing a market indexes.

1.

2.

3.