Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- The base period for an index number refers to the first period in the series of measurements.
- Five years ago, a company experienced some extremely unusual events, including a major strike and a widely publicized health concern about one of its products. Since the firm tended to hit bottom during the time, the year would be a good choice as a base period for an index reflecting production volume.
- The Dow Jones Industrial Average is an example of an index
- The simple relative index is the most elementary form of an index number construction.
- Simple relative indexes can be constructed for price or quantity, but not for value
- For a simple relative price index, the base period is 1986 and the index value for 1989 is 120.0. This indicates that price increased 20% from 1986 to 1989.
- A simple aggregate index can be viewed as a weighted aggregate index in which each component is a sign assigned the same weight.
- A simple aggregate relative index is the sum of prices in the selected period divided by the sum of those in the base period, with the quotient being multiplied by 100
- If one of the item in a simple aggregate price index is milk, the index will be unchanged if the price of milk is expressed in dollars per quart instead of dollars per gallon.
- One of the problems with a simple aggregate quantity index is that the quantities may be expressed in different units.
- In a Passche index, prices are weighted according to the quantities of the various items in the base period.
- The Consumer Price Index is a simple aggregate index.
- One application of the Consumer Price Index is to automatically increase wages or benefits through its inclusion in labor contracts.
- "Real income" refers to the amount money available after government taxes have been paid.
- The Producer Price Index measures changes in the physical volume or quantity of output of manufacturing, mining, and electric and gas utilities.
True of False
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