The Four Stock Index (FSI) is computed as the S&P 500 is computed. The base year is 1980 and the four companies had the situations below in 1980 and 2012. If the initial FSI was set at 15, fill in the capitalizations and compute the FSI in 2012. 1980 Company Shares A 5000 B 2500 C 1000 D 9000 Price $12 $20 $80 $30 Capitalization Shares 10000 3000 3500 17000 2012 Price Capitalization $20 $28 $23 $25

Essentials Of Investments
11th Edition
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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The Four Stock Index (FSI) is computed as the S&P 500 is computed. The base
year is 1980 and the four companies had the situations below in 1980 and 2012. If
the initial FSI was set at 15, fill in the capitalizations and compute the FSI in 2012.
1980
Company Shares Price
A
5000
$12
B
2500
C
1000
D
9000
$20
$80
$30
Capitalization Shares
10000
2012
Price Capitalization
$20
3000 $28
3500
$23
17000
$25
Transcribed Image Text:The Four Stock Index (FSI) is computed as the S&P 500 is computed. The base year is 1980 and the four companies had the situations below in 1980 and 2012. If the initial FSI was set at 15, fill in the capitalizations and compute the FSI in 2012. 1980 Company Shares Price A 5000 $12 B 2500 C 1000 D 9000 $20 $80 $30 Capitalization Shares 10000 2012 Price Capitalization $20 3000 $28 3500 $23 17000 $25
Expert Solution
Introduction

The index is computed as follows,

FSI  = Total Capitalization / Divisor

where capitalization = No. of Shares * Price per share 

The divisor is a constant which is derived using the initial FSI, which is given. 

First, the capitalization for 1980 is required. 

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