Chapter 2, Problem 21PS

Summary Introduction

To determine:

The problems that a mutual fund trying to have an index fund tied to an equally weighted index of a broad stock market would confront.

Introduction:

A barometer of the economic performance is the stock market index. An increase in the index indicates good revenues, more profitability and better capital investments which in return promise a strongly growing economy. On the other hand a declining index signals a weak economy or weakening economic activity. Since 1896, the Dow Jones Industrial Average has been computed for 30 large blue chip companies.