10. Suppose the stock of Microsoft increases in value by $5 per share. If all other Dow
stock prices remain unchanged, how does this affect the DJIA?
A) 37.80 points up
B) 30.24 points up
C) 22.68 points up
D) 15.12 points up
could be any of those, depending on the proportion of Microsoft stock in the DJIA.
To determine how the increase in Microsoft's stock value affects the DJIA, we need to know the weighting of Microsoft within the index. The DJIA is calculated by summing up the prices of the 30 Dow stocks and dividing by the Dow Divisor. Each stock's weight in the index is proportionate to its price.
Unfortunately, the specific weightings of the stocks within the DJIA are not provided in this question. To solve this problem, we will assume an equal weighting for each stock in the index.
In that case, since there are 30 stocks in the DJIA, each stock contributes 1/30th (or approximately 0.0333) to the index. Therefore, a $5 increase in Microsoft's stock price would contribute approximately 0.0333 * $5 = $0.1667 to the DJIA.
To convert this to index points, we need to divide the contribution by the Dow Divisor. As of 2021, the Dow Divisor is 0.14744568353097.
Therefore, $0.1667 / 0.14744568353097 = approximately 1.1291.
However, the answer choices provided are in increments of 7.56 points. To get the closest match, we divide 1.1291 by 7.56 = 0.1493.
Since the DJIA is rounded to two decimal places, the closest answer choice is approximately 0.15 points up.
So, based on our calculation, the answer is D) 15.12 points up.