Chapter 3: Information & Indices

Question 1

Market Cap Calculation

Answer 1

Share price for the company x number of shares in issue

Question 2

What is free-float?

Answer 2

The shares that are theoretically available to be purchased by the general public

Question 3

How do you re-base an index

Answer 3

1. Make the year you want to rebase from 100 by original price x 100 / original price
2. for the previous years x 100 / original price of the year you started from

Question 4

What do geometric indices measure?

Answer 4

The rate of change in the prices of the constituents making up the index
* multiples all of the numbers making up the index and takes the nth root of this

Question 5

FT 30

Answer 5

Equally weighted geometric mean of the prices of the 30 leading UK stocks

Question 6

Dow Jones Industrial Average

Answer 6

Simple underweight arithmetic index
No longer only industrials

Question 7

S&P 500

Answer 7

market cap weighted arithmetic index comprising of 500 US stocks from industrials, transport, utility and finance

Question 8

Eurofirst

Answer 8

derivative friendly index, tracking liquid assets