Activity #1 Indexes-4

Activity #1 Indexes The following table gives you a list of the 30 stocks in the Dow Jones Industrials Average (DJIA) index, their price, and their weights as of August 8 th , 2023. The last column gives you the market capitalization of each stock. Name Weight (%) Price Market Capitalization ($B) UnitedHealth Group Inc 9.44 505.86 468.58 Goldman Sachs Group Inc 6.50 348.26 118.83 Home Depot Inc/The 6.12 327.81 329.57 Microsoft Corp 6.09 326.05 2,422.47 McDonald's Corp 5.40 289.58 211.04 Caterpillar Inc 5.28 282.89 144.31 Amgen Inc 4.87 260.80 139.50 Visa Inc 4.47 239.29 500.10 Boeing Co/The 4.44 238.04 143.59 Salesforce Inc 3.95 211.58 206.08 Honeywell International Inc 3.50 187.65 124.59 Apple Inc 3.36 179.80 2,811.03 Johnson & Johnson 3.23 173.18 450.09 Travelers Cos Inc/The 3.13 167.88 38.43 American Express Co 3.10 165.87 122.16 Walmart Inc 3.00 160.65 432.60 Chevron Corp 2.98 159.65 298.11 Procter & Gamble Co 2.93 157.09 370.31 JPMorgan Chase & Co 2.91 155.88 453.00 International Business Machines Corp 2.72 145.91 132.92 NIKE Inc 2.05 109.69 167.82 Merck & Co Inc 1.99 106.41 270.02 3M Co 1.94 104.12 57.47 Walt Disney Co/The 1.64 88.13 161.04 Coca-Cola Co/The 1.14 60.92 263.44 Dow Inc 1.03 55.01 38.68 Cisco Systems Inc 0.99 53.06 216.22 Intel Corp 0.65 35.02 146.66 Verizon Communications Inc 0.61 32.57 136.93 Walgreens Boots Alliance Inc 0.55 29.53 25.49

Question 1 : Is the Dow Jones index (circle one) A. A value-weighted index B. A price-weighted index C. An earnings-weighted index D. An equal-weighted index Question 2: Which stock has the largest weight in the Dow Jones index? -United Health Group. Use a number from the table to explain why. -United Health Group has a weight of 9.44% which is the highest weight on the list. Question 3: Use data from the table to explain why the stock that you identified in Question 2 should not have the largest weight in the S&P 500 index. -The S&P 500 has many more companies on its index, and thus the weight for each stock will look much different as many companies in the S&P 500 are not in the Dow Jones Index. Other companies will have more market capitalization. Question 4 : The Dow Jones price index level was 33,147.25 on December 31, 2022, and 35,314.49 on August 8, 2023. If you invested in the stocks of the Dow Jones index on December 31, 2022, would the return on your investment be 35,314.49/33,147.25-1 =6.54%? Explain why or why not. (Hint: Think about the difference between a total return index and a price index.) -Yes, it would be a positive return as the investment increased due to the price index. The price index shows what the investors get back. Question 5: Use Yahoo! Finance and the tab “Historical Data” to find the level of the DJIA price index on August 29 th , 2023 at the close. -22.02 Question 6: Apple is a member of both the Dow Jones index and the S&P 500 index. On August 31, 2020, Apple had a 4:1 stock split. Each owner of a share got four shares. At the same time,