Consider the three stocks in the following table. Pt represents price at time t,

Question

Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. Stock C splits two-for-one in the last period (t2) 92 52 104 100 200 200 97 47 114 100 200 200 2 97 47 57 100 200 400 Calculate the first-period rates of return on the following indexes of the three stocks: (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. A market value-weighted index Rate of return b. An equally weighted index Rate of return

Explanation / Answer

Market Value Weighted Index Return:

Market Value in Period 0 = 92 * 100 + 52 * 200 + 104 * 200 = 40400

Market Value in Period 1 = 97 * 100 + 47 * 200 + 114 * 200 = 41900

Market Value Weighted Index Return = (41900-40400)/40400 = 3.71%

(b) Equal Weighted Index Return :

= 1/3 * (97-92)/92 + 1/3 * (47-52)/47 + 1/3 * (114-104)/104 = 1.81%

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---